Federal Court of Australia

Michales v CharterLaw Legal Pty Limited [2026] FCA 209

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s application filed 23 September 2025, to join additional parties to the proceeding, be dismissed.

2.    The applicant’s application filed 13 January 2026, to amend the application referred to at order 4 below, be dismissed.

3.    The applicant’s application filed 15 December 2025 for review of the Registrar’s decision to set aside a Notice to Produce and to decline leave to issue subpoenas, be dismissed.

4.    The applicant’s application filed 16 July 2025, to set aside the bankruptcy notice with reference BN279414, be dismissed.

5.    If so advised, the respondent is to file submissions on the question of indemnity costs by 4:00pm on Friday 20 March 2026, which submissions are not to exceed 6 pages in length, together with any evidence in support.

6.    In the event that the respondent files submissions in accordance with order 5 above:

(a)    the applicant is to file submissions in response not exceeding 6 pages in length on the question of indemnity costs by 4:00pm on Thursday 2 April 2026, together with any evidence in response; and

(b)    the respondent is to file any submissions in reply not exceeding 3 pages in length by 4:00pm on Friday 10 April 2026, together with any evidence in reply.

7.    In the event that the respondent does not file submissions in accordance with order 5 above, the applicant is to pay the respondent’s costs of each application referred to in orders 1 to 4 above, including the costs of each hearing before Judicial Registrar Segal, and before Registrar White, on a party/party basis.

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

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1    This is an application for review of a Registrar’s decision not to set aside the bankruptcy notice BN279414 issued to the applicant, Mr Paul Michales, by the first respondent, CharterLaw Legal Pty Ltd (CLL), in the total amount of $107,654.53. For reasons which will become apparent, it is relevant that CLL is represented in these proceedings by CharterLaw Pty Ltd which took over CLL’s legal practice when it ceased legal practice on 30 June 2024.

2    The applicant was unrepresented in these proceedings. While the applicant initially specified Registrar White as the second respondent to the review application, the Registrar was removed as a respondent by orders made on 17 November 2025.

3    These proceedings arise from fees payable by the applicant, a former client of CLL, in relation to the conduct of legal proceedings relating to a tax agency business operated by the applicant. The bankruptcy notice was served on the applicant, together with the underlying judgments, by express post under cover of a letter dated 1 July 2025. The applicant acknowledged receipt of the bankruptcy notice in emails to employees of CLL on 3 July 2025.

4    A review of a Registrar’s decision under s 35A(5) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) is in the nature of a hearing de novo and is not fettered by the decision under review: Elks, in the matter of Moreton Resources Limited (Receivers Appointed) [2025] FCA 1670 at [78] (Wheatley J).

5    For the reasons set out below:

(1)    the application to amend the application to set aside the Registrar’s decision is refused;

(2)    the application by the applicant for leave to issue certain subpoenas should be refused; and

(3)    the originating application is dismissed.

6    Further, as requested by CLL, I will afford CLL the opportunity to apply for indemnity costs. Finally, for completeness I note that the applicant’s joinder application was ultimately not pressed but for clarity I considered it appropriate to make an order dismissing that application.

2.    BACKGROUND

2.1    The bankruptcy notice

7    CLL conveniently summarised facts which are common ground between the parties, having regard to the applicant’s affidavit sworn 16 July 2025.

8    CLL was engaged to provide legal services to the applicant from February 2020 to April 2023. The applicant paid CLL $262,609.92 in legal fees before CLL ceased to act for him.

9    CLL ceased engaging in legal practice on 30 June 2024. CLL’s legal representatives in these proceedings, CharterLaw, commenced legal practice in NSW on 1 July 2024.

10    When CLL ceased acting for the applicant, there was an outstanding balance of account for legal fees which was the subject of a costs assessment and review process which took place between 12 April 2024 and 3 June 2025. The applicant participated in that assessment and review process. On 3 June 2025, the costs review panel affirmed the costs assessor’s determination. On the same day, the review panel certified the costs payable by the applicant in respect of the review.

11    The Local Court of New South Wales subsequently issued two judgments based on the costs assessment certificates in respect of which the bankruptcy notice was issued. The judgments were entered against Paul Michales (the first defendant) and the Michales Corporation Pty Ltd ATF the Paul Michales Family Trust (the second defendant):

(1)    on 13 March 2025, in the amount of $99,449.58; and

(2)    on 17 June 2025, in the amount of $8,204.95.

12    Liability for costs as assessed is joint and several in accordance with the ordinary rule: Australian Competition and Consumer Commission v Homeopathy Plus! Australia Pty Limited (No 2) [2015] FCA 1090 at [92] (Perry J) (citing Trade Practices Commission v Nicholas Enterprises Pty Ltd (1979) 28 ALR 201 at 210 (Fisher J) with approval).

13    The bankruptcy notice was issued against the applicant by an Official Receiver on 30 June 2025. On 3 July 2025, CLL served the bankruptcy notice on the applicant.

2.2    The present proceedings

14    On 16 July 2025, the applicant filed a Form B2 originating application under the Federal Court (Bankruptcy) Rules 2016 (Cth) seeking the following relief:

1. An order under section 52(1) of the Bankruptcy Act 1966 (Cth) annulling the bankruptcy notice issued on 30 June 2025 against the Applicant.

2. Alternatively, an order setting aside the bankruptcy notice under section 55 of the Bankruptcy Act 1966 on the ground of misrepresentation, improper conduct, or fraud on the part of the Respondent.

3. An order staying the enforcement of any costs determination issued to the Respondent, on the basis that the Respondent was not a qualified entity within the meaning of the Legal Profession Uniform Law (NSW) s 10, at the time of applying for or receiving the certificate of costs determination.

4. That the creditor’s petition filed by CLL Pty Ltd be dismissed.

5. That the costs determination dated 4 March 2025 be declared unenforceable or permanently stayed.

6. That the bankruptcy notice issued pursuant to said determination be set aside under section 41 of the Act and regulation 4.02.

7. That proceedings be stayed pending investigation into unlicensed legal practice and corporate misconduct involving Charterlaw Legal Pty Ltd and any successor entity CharterLaw Pty Ltd.

8. Pursuant to Section 10(2) and 10(3) of the Legal Profession Uniform Law (NSW), I respectfully request that any amount awarded to Charterlaw Legal pty ltd — including the $92,459.62 determined by costs assessment on 4 March 2025 — be refunded in full to the Applicant.

9. The costs award was granted based on misrepresentation and unlawful practice. As Charterlaw Legal pty ltd was not a qualified law practice at the time of application, it was prohibited from claiming, recovering, or retaining legal costs under the LPUL. The Applicant seeks restitution of said funds on grounds of statutory violation and unjust enrichment.

10. Any further or other relief as the Court deems just.

15    On 23 September 2025, the applicant lodged an interim application seeking to join numerous entities as respondents, including the NSW Police, judicial officers, and the NSW Attorney General’s office.

16    On 24 September 2025, a Registrar refused to grant the relief sought by the applicant and ordered that the application to set aside the bankruptcy notice be dismissed (the Registrar’s Decision). The proceeding before the Registrar was conducted on the basis that the applicant’s claim was for the bankruptcy notice to be set aside by reason of a counter-claim, set-off or cross-demand under s 40(1)(g) of the Bankruptcy Act 1966 (Cth), this being the tenor of the application even though his claim was not expressed in these terms. The Registrar also refused to accept the joinder application for filing.

17    On 3 October 2025, the applicant filed an interim application seeking review of the Registrar’s Decision. The applicant seeks the following relief:

1. That the Registrar’s decision dated 24 September 2025 be set aside.

2. That the matter be remitted for proper adjudication of sealed Annexure B3 and licensing compliance.

3. The Applicant respectfully requests that any enforcement proceedings—including any bankruptcy actions initiated by AFSA or CharterLaw Legal Pty Ltd—be stayed pending resolution of this review, to prevent irreparable harm and preserve the integrity of the judicial process.

4. Costs.

18    On 24 November 2025, the applicant filed a Notice to Produce and four requests for leave to issue subpoenas. On 28 November 2025, a Registrar set aside the Notice to Produce and refused leave to issue the subpoenas on the basis that the documents sought had already been produced or were not relevant.

19    On 14 December 2025, the applicant applied for review of the Registrar’s decision to set aside the Notice to Produce.

20    On 12, 19 and 21 January 2026, the applicant filed five further requests for leave to issue subpoenas, which were refused by a Registrar on 23 January 2026.

21    On 13 January 2026, the applicant filed an interlocutory application seeking leave to amend his originating application to:

(1)    amend the relief sought to include additional declarations, injunctions, a claim for damages under the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)), and restitution of fees paid by the applicant;

(2)    seek ancillary orders for production of documents; and

(3)    join two additional respondents.

3.    THE PRELIMINARY COMPETENCY/JURISDICTIONAL OBJECTION RAISED BY THE APPLICANT

22    At the hearing on 25 February 2026, the applicant raised a preliminary objection that, by reason of ceasing to operate a legal practice under the Legal Profession Uniform Law (NSW), CLL lost the capacity to provide instructions to its solicitors and to appear and take any steps in the proceedings to enforce the debt. Further, the applicant contends that CharterLaw is a “phoenix” company which cannot act for CLL. This objection was put in various ways as a jurisdictional issue, a question of standing and a question of competency. The applicant also objected for the same reason to the Court Book prepared by CharterLaw, and to Mr Willson, who is the employed solicitor of CharterLaw with carriage of the present matter, giving evidence.

23    It is necessary to address this objection first. This objection overlaps significantly with the applicant’s submission on the substantive question of whether the bankruptcy notice should be set aside on the basis that CLL could not enforce the two judgment debts after it ceased engaging in legal practice on 30 June 2024. As a result, I did not consider that it was appropriate to rule finally on the preliminary objection at the hearing. Rather, I ruled in a preliminary way that there was, on the face of the evidence, a sufficient basis in the evidence on which to proceed on the basis that CLL was in a position to give instructions to its solicitors and to appear and participate in the hearing. My preliminary view was clearly correct for the reasons I give below in disposing of the originating application. In my view, the applicant’s objections to the contrary are completely without merit.

24    In summary, first, for reasons I shortly explain, CLL is a registered company with directors who are its controlling mind. As such, CLL is able to engage solicitors and instruct them, including to engage a barrister, through its officers, and to give instructions in the proceeding including for its solicitors to prepare the court book, as was confirmed by Mr Willson’s evidence in cross-examination. Furthermore, r 4.01 of the Federal Court Rules 2011 (Cth) (FCR) requires a corporation to have legal representation absent leave from the court.

25    Secondly, CLL did not in any sense engage in legal practice contrary to the Uniform Law in seeking to enforce, after it ceased practising law, debts owing to the company for services provided while it was in legal practice.

26    Thirdly, no authority was identified in support of the proposition that there was no jurisdiction for CLL assisted by its solicitors to engage in the costs assessment process and for the costs assessor and review panel to issue costs certificates. The jurisdiction to do so arose from ss 71 and 88 of the Legal Profession Uniform Law Application Act 2014 (NSW) and reg 50 of the Legal Profession Uniform Law Application Regulation 2015 (NSW) (now contained in reg 52 of the Legal Profession Uniform Law Application Regulation 2025 (NSW)).

27    Fourthly, contrary to the applicant’s submission, Mr Willson had capacity to give evidence under s 12 of the Evidence Act 1992 (Cth) and to do so as an employee of CharterLaw with carriage of the matter for CLL.

28    Finally, CLL and its solicitors are distinct and separate legal entities. Nor is there a skerrick of evidence to suggest that CLL’s solicitors were in some way a “phoenix” company in the sense that Charterlaw was created to continue or take over CLL’s legal practice in pursuit of some illicit purpose. Rather, the allegation appeared to be founded on scandalous and unfounded assertions made by the applicant in his affidavits.

4.    EVIDENCE

29    As a result of raising a preliminary issue as to the competency of CLL to participate in the action, the applicant did not seek to read his various affidavits filed in the proceedings and objected to the Court Book (which reproduced the applicant’s evidence) on the basis that it was prepared without authority or competence by CharterLaw. At the hearing, I considered that the fairest way to proceed was to treat the applicant’s evidence as having been received, CLL’s affidavits (also included in the Court Book) as read, and the Court Book otherwise as received in evidence, subject to finally ruling on the preliminary objection. As that objection has not been upheld, all of the evidence in the Court Book is before me on the interlocutory and originating applications.

30    The Court Book contains affidavits sworn by the applicant on the following dates:

(1)    two affidavits on 16 July 2025;

(2)    21 July 2025;

(3)    6 September 2025;

(4)    two affidavits on 11 September 2025;

(5)    15 September 2025;

(6)    17 September 2025;

(7)    18 September 2025;

(8)    29 September 2025;

(9)    13 December 2025;

(10)    16 December 2025; and

(11)    30 January 2025 (filed on 13 January 2026).

31    I note that the lengthy affidavit material filed by the applicant contains allegations, unsupported by evidence, that CLL’s conduct amounts to some form of wrongdoing, such as professional negligence or abuse of process. As CLL submits, those claims are scandalous and rise no higher than bare assertions. As such, the claims ought not to have made and I have not had regard to them, as I indicated at the hearing.

32    CLL relied on four affidavits affirmed by Jarryd James Willson on 23 July 2025, 8 September 2025, 23 September 2025 and 20 February 2026. Mr Willson was cross-examined by the applicant at the hearing. The key points which emerge from his evidence can be briefly summarised as follows:

(1)    CLL and CharterLaw are registered companies, as evidenced by ASIC company extracts;

(2)    Mr Willson is a solicitor employed by CharterLaw, acting on instructions from the directors of CharterLaw’s client, CLL;

(3)    he prepared the Court Book under the direction of Peter McCrohon, the supervising senior lawyer of CharterLaw;

(4)    he had seen documents showing Peter McCrohon held a practising certificate entitling him to practice as a principal of a law practice without restriction from at least November 2022; and

(5)    CharterLaw instructed counsel to appear at the hearing.

33    Mr Willson gave his evidence in a straightforward, helpful and clear manner, and I accept his evidence as truthful.

5.    LEAVE TO AMEND THE ORIGINATING APPLICATION

34    Rule 8.21 of the FCR confers a discretion on the Court to grant leave to amend an originating application: Tamaya Resources Ltd (In Liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2; (2016) 332 ALR 199 at [122] (Gilmour, Perram and Beach JJ) (Tamaya Resources (FCAFC)). The rule relevantly provides:

(1)    An applicant may apply to the Court for leave to amend an originating application for any reason, including:

…

(g)    to add or substitute a new claim for relief, or a new foundation in law for a claim for relief, that arises:

(i)    out of the same facts or substantially the same facts as those already pleaded to support an existing claim for relief by the applicant; or

(ii)    in whole or in part, out of facts or matters that have occurred or arisen since the start of the proceeding.

35    I summarised the relevant principles governing an application for leave to amend in DOQ17 v Australian Financial Security Authority [2018] FCA 561 at [26] as follows:

Leave to amend would ordinarily be exercised in favour of an amendment if facts already pleaded gave rise to an additional cause of action: Tameeka Group Pty Ltd v Landan Pty Ltd (No 2) [2016] FCA 480 (Markovic J). However, leave will generally be refused where the amendment would be futile, such as where it fails to disclose a reasonable cause of action or seeks to raise a case that is misconceived in point of law, where the amendment is embarrassing, or where the amendment is otherwise liable to be struck out: Research in Motion [v Samsung Electronics Australia Pty Limited [2009] FCA 320] at [23] (Kenny J); Allstate Life Insurance Company v Australia and New Zealand Banking Group Ltd (1995) 58 FCR 26 at 36 (Lindgren J (with whose reasons Lockhart and Tamberlin JJ agreed)); SZSRR v Minister for Immigration and Border Protection [2017] FCA 328 at [48] (Gleeson J). In determining whether the amendment would be liable to be struck out, relevant principles include the following.

(1)    In determining whether to strike out a pleading, the central function of pleadings must be borne squarely in mind, namely, to state with sufficient clarity the case to be met so as to ensure as a matter of procedural fairness that a party has the opportunity of meeting the case against it: see also Australian Parking and Revenue Control Pty Ltd v Reino International Pty Ltd [2016] FCA 744 (Australian Parking (No. 1)) at [19(1)] (Perry J).

(2)    While a respondent has no absolute right to insist that an applicant plead every material fact necessary to demonstrate a complete cause of action, all of the material facts necessary to formulate a complete cause of action should in general be pleaded such that the respondent understands the case to be met: r 16.02(2) of the FCR; Young Investments Group Pty Ltd v Mann [2012] FCAFC 107; (2012) 293 ALR 537 (Young Investments Group) at [7] (the Court).

(3)    A pleading which simply pleads a conclusion from unstated facts is embarrassing and is liable to be struck out: Trade Practices Commission v David Jones (Australia) Pty Ltd (1985) 7 FCR 109 at 114-5 (Fisher J); Young Investments Group at [7]. A pleading is also embarrassing where it is unintelligible, ambiguous, vague or too general, so as to embarrass the opposite party who does not know what is alleged against her or him: Priest v New South Wales [2006] NSWSC 12 at [34] (Johnson J).

(Emphasis omitted.)

36    Furthermore, the Court must exercise its discretion to grant leave to amend in accordance with the overarching purpose in s 37M of the FCA Act: Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 at [125] (Gleeson J) (affirmed in Tamaya Resources (FCAFC); and DOQ17 at [27]). Section 37M relevantly provides:

(1)    The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a)    according to law; and

(b)    as quickly, inexpensively and efficiently as possible.

(2)    Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a)    the just determination of all proceedings before the Court;

(b)    the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c)    the efficient disposal of the Court’s overall caseload;

(d)    the disposal of all proceedings in a timely manner;

(e)    the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

37    The availability of leave to amend an application to set aside a bankruptcy notice is further confined by reason of the 21-day statutory period for compliance with the bankruptcy notice: Bankruptcy Act s 41(2A). In Coshott v Prentice, in the matter of Coshott (No 2) [2016] FCA 1531 at [48]-[49], Bromwich J held:

The burden of authority as to enlarging grounds does not support any freestanding right or entitlement to litigate later advanced additional grounds in support of an application to set aside a bankruptcy notice, assuming a valid application was made within the time for compliance with that notice. Moreover, there is a public interest in ensuring that the enforcement of debts by way of bankruptcy notices does not become mired in the sort of litigation that often gave rise to a judgment debt in the first place. In part that is because bankruptcy notices are an important part of the means by which civil laws are enforced and the orders of courts are thereby given real substance and meaning. While bankruptcy is a dire consequence of not paying debts arising from enforceable orders of the court, it is a vitally important ultimate remedy that helps to enhance the overall integrity of civil justice.

Even if leave may be given to amend an otherwise valid application to set aside a bankruptcy notice and even if leave may be given to supplement the grounds in support of such an amendment such as by way of a further accompanying affidavit, that should be treated in the same manner as final pleadings, with such amendments and supplements not lightly countenanced. The now well-established principles in relation to amending pleadings in Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175 at 211-213 [93]-[98] and since reflected in ss 37M, 37N and 37P of the Federal Court of Australia Act 1976 (Cth) should apply to any power to amend the effective pleadings constituted by the affidavit accompanying an application to set aside a bankruptcy notice. An application for leave to enlarge the grounds upon which a bankruptcy notice is sought to be set aside should be closely scrutinised. Leave, assuming there is power to grant it, should not be given to rely upon additional unmeritorious or otherwise questionable claims, especially if they have the effect of inordinately delaying determination of the application.

38    It is clear, as CLL submits, that the proposed amendments go well beyond an application to set aside the bankruptcy notice. In particular, as CLL submits, the proposed amended application:

(1)    seeks to join two additional parties, neither of which is a judgment creditor of Mr Michales;

(2)    asks the Court to determine matters which are beyond the issues required to be answered for an application seeking to set aside the bankruptcy notice; and

(3)    seeks relief (including damages and restitution) that this Court has no power to grant in a proceeding of this kind.

39    In addition, the proposed amended application is expressed as an entirely new claim, significant parts of which are misconceived and liable to be struck out. Having regard to the overarching principle in s 37M of the FCA Act, leave to amend the originating application should therefore be refused.

40    I note that CLL also submitted that the 21-day statutory period for compliance with a bankruptcy notice under s 41(2A) of the Bankruptcy Act operates as a jurisdictional bar, such that an application to set aside the bankruptcy notice may not be amended to expand the scope of the challenge after the statutory period has elapsed. CLL relied on Foyster v ANZ Banking Group Ltd [1999] FCA 1032 at [9] (Emmett J) for that submission. This provides a further reason why I would in any event have refused the application.

6.    SHOULD THE NOTICE TO PRODUCE BE SET ASIDE?

41    The Notice to Produce requests the following documents from CLL:

(1)    LawCover certificates of currency and invoices;

(2)    Law Society practising certificates and invoices; and

(3)    payslips, employment contracts, payroll information and bank transfer records.

42    Lack of apparent relevance is a ground for setting aside a notice to produce. The test of apparent relevance is whether the documents are “reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case”: Seven Network Ltd v News Ltd (No 11) [2006] FCA 174 at [6] (Sackville J). The onus is on Mr Michales to demonstrate the apparent relevance of the documents sought: Seven Network at [7].

43    The applicant submits that the documents sought by the Notice to Produce are required to establish whether CLL held insurance during the period and whether its employees held practising certificates. The applicant further submits that, while LawCover certificates of currency dated January 2025 confirming the insurance status of CLL from 1 July 2020 to 30 June 2024 are in evidence, the underlying certificates issued from 2020 to 2024 are not.

44    Under s 212 of the Uniform Law, a law practice is liable to pay a civil penalty if it engages in legal practice without holding an approved insurance policy. Section 6 of the Uniform Law defines an “Australian legal practitioner” (a type of “qualified entity” entitled to engage in legal practice) as “an Australian lawyer who holds a current Australian practising certificate”. However, these provisions have no relevance to the applicant’s bankruptcy notice because they do not confer on the applicant any right to a counter-claim, set-off or cross demand against CLL. The applicant’s key contention in these proceedings is that the debt the subject of the bankruptcy notice is not payable by reason of s 10(2) of the Uniform Law, on the basis that CLL is not, and during the costs assessment process was not, a “qualified entity”.

45    CLL’s insurance status and the practising certificate status of CLL’s employees are incapable of affecting whether CLL satisfied the definition of an “incorporated legal practice” so as to be a “qualified entity” under s 10(1) of the Uniform Law at the relevant times. As defined in s 6 of the Uniform Law (subject to presently irrelevant exceptions regarding in-house legal services, community legal services and professional associations), the status of an “incorporated legal practice” turns only on whether CLL:

(1)    was a company within the meaning of the Corporations Act 2001 (Cth); and

(2)    had given a notice under s 104 of the Uniform Law of its intention to engage in legal practice to the NSW Law Society which was still operative.

46    CLL has tendered an ASIC search dated 20 February 2026 indicating CLL was registered as a corporation on 15 July 2015, and remains registered. CLL has also tendered an email from the NSW Law Society dated 30 January 2025 stating that according to the Law Society’s records, CLL was registered as an incorporated legal practice for the period 1 September 2015 to 30 June 2024. While strictly the email from the NSW Law Society is hearsay evidence, it can in any event safely be inferred from the existence of the certificates of currency that, in order to get LawCover insurance, CLL must have been an incorporated legal practice.

47    Accordingly, the documents sought by the applicant’s Notice to Produce have no apparent relevance to the issues in the proceeding. The application for review of the Registrar’s decision to set aside the Notice to Produce should be refused. To the extent they remain in issue, the applicant’s requests for leave to issue subpoenas similarly have no legitimate forensic purpose and should also be refused: Wong v Sklavos [2014] FCAFC 120; (2014) 319 ALR 378 at [12] (Jacobson, White and Gleeson JJ).

7.    SHOULD THE BANKRUPTCY NOTICE BE SET ASIDE?

48    Section 41(1) of the Bankruptcy Act provides (relevantly) that an Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained, against a debtor, two or more final judgments, execution of which have not been stayed. The aggregate of the judgments relied upon must be not less than $10,000: Bankruptcy Regulations 2021 (Cth), r 10A.

7.1    Requirements for setting aside a bankruptcy notice

49    Section 40(1)(g) of the Bankruptcy Act provides that a bankruptcy notice can be set aside if the debtor satisfies the Court that he or she has:

a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;

(Emphasis added.)

50    In Joseph v Segelov [2025] FCA 1340, Stewart J considered what an applicant must establish in order to have a bankruptcy notice set aside on the basis of a counterclaim, or as an abuse of process. His Honour said at [7]–[9]:

Setting aside a bankruptcy notice in reliance on a counterclaim

In order to succeed in setting aside the bankruptcy notice, the applicant must “satisfy” the court of the matters referred to in s 40(1)(g) of the Bankruptcy Act. He is not required to prove those matters, as on a final hearing; “the court should be satisfied that [he] has a claim deserving to be finally determined”; he must “satisfy the court that there is sufficient substance to the counter-claim, set-off or cross-demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy”: Glew v Harrowell, in the matter of Glew [2003] FCA 373; 198 ALR 331 at [11]-[12] per Lindgren J, applied in Fitzgerald v Fitzgerald [2021] FCAFC 225 at [8]-[9] per Logan J, Rangiah and Downes JJ agreeing.

Setting aside a bankruptcy notice as an abuse of process

The court has an inherent or implied power to set aside a bankruptcy notice as an abuse of process where it is satisfied that it is in the interests of justice to do so: Re Sterling; Ex parte Esanda Ltd [1980] FCA 75 (AustLII citation [1980] FCA 61); 30 ALR 77 at 82 per Lockhart J and Seller v Deputy Commissioner of Taxation [2011] FCA 865; 282 ALR 80 at [14]-[20] per Flick J. There is also a statutory source of power in s 30(1)(b) of the Bankruptcy Act.

The party alleging an abuse of process, being the applicant, bears the onus of establishing the purpose for which the bankruptcy notice was issued and that it was improper: Nobarani v Mariconte [2021] FCAFC 96 at [32] per Allsop CJ, Farrell and Derrington JJ. The allegation of an abuse of process is a serious one which cannot be made without a sufficient factual foundation and the party alleging it bears a “heavy onus” in establishing its existence: Williams v Spautz [1992] HCA 34; 174 CLR 509 at 529; Nobarani at [32]. The time at which to ascertain whether a bankruptcy notice is an abuse of process is the time when it is issued: Nobarani at [33]. It is not an improper purpose to issue a bankruptcy notice for the purpose of having a debt paid, so long as the creditor intends to invoke the Court’s bankruptcy jurisdiction if it is not: Nobarani at [42]-[43].

7.2    Section 10 of the Legal Profession Uniform Law (NSW)

51    As earlier explained, it was common ground that CLL ceased to be an incorporated legal practice on 30 June 2024. The applicant submits that CLL’s conduct after that date in pursuing fees for past work done amounts to engaging in legal practice in contravention of s 10(1) of the Uniform Law. For this reason, the applicant submits that by reason of s 10(2) of the Uniform Law, CLL is not entitled to the amounts the subject of the Local Court judgments, and is bound to repay the amounts previously paid to it.

52    Section 10 of the Uniform Law relevantly provides:

(1)    An entity must not engage in legal practice in this jurisdiction, unless it is a qualified entity.

Penalty: 250 penalty units or imprisonment for 2 years, or both.

(2)    An entity is not entitled to recover any amount, and must repay any amount received, in respect of anything the entity did in contravention of subsection (1). Any amount so received may be recovered as a debt by the person who paid it.

53    Section 6 of the Uniform Law defines “qualified entity” to include a “law practice”, which is in turn defined to include an “incorporated legal practice”. As discussed above, CLL’s former status as an “incorporated legal practice” relevantly turns only on registration as a company and the giving of a notice under the Uniform Law.

54    The Uniform Law contains the following relevant definitions:

engage in legal practice includes practise law or provide legal services, but does not include engage in policy work (which, without limitation, includes developing and commenting on legal policy);

legal services means work done, or business transacted, in the ordinary course of legal practice;

55    The essence of legal practice is “the advising of a particular person in a particular situation and the production of a document which affects legal rights and which is tailored to the particular needs of that person”: Australian Competition & Consumer Commission v Murray [2002] FCA 1252 at [94] (Heerey J). Legal practice also includes “appearances in court, preparation of evidence and advising on the gathering of evidence, advising on interlocutory processes, advice in connection with the drafting of legal and other documents, advice and participation in alternative dispute resolution procedures, advice on prospects of the proceedings and advice on the settlement of the proceedings”: Council of the NSW Bar Association v Dwyer [2015] NSWCA 302 at [14] (Basten, Ward and Emmett JJA).

56    As a registered corporation, CLL has the legal capacity of an individual: Corporations Act 2001 (Cth) s 124; National Roads and Motorists Association Ltd v Parkin (2004) 60 NSWLR 224 at [51], [52] (Ipp JA). By commencing proceedings on its own behalf to recover a debt from the applicant, CLL does not engage in legal practice. CLL is not acting pursuant to a retainer with the applicant, is not acting on instructions from the applicant, is not advising the applicant of his rights, and is not purporting to represent him in litigation or otherwise.

57    The construction of s 10 of the Uniform Law for which the applicant contends is completely misconceived. As Black J observed in setting aside a statutory demand made by the applicant against CLL (In the matter of CharterLaw Legal Pty Ltd [2025] NSWSC 297 at [21]):

it would be a remarkable result if a provision that is intended to provide for repayment of legal costs, in respect of services provided by unlicensed entities, has the consequence that costs are repayable in respect of services provided by licensed entities, merely because they later ceased to conduct business or hold the relevant licences, well after the services were provided. One obvious difficulty with that proposition is that it would subvert the apparent statutory purpose of the prohibition, because an entity which was licensed and properly entitled to provide those services at the relevant time would be exposed to the same risks as an unlicensed entity, which provided those services without being entitled to do so.

(Emphasis in original.)

58    It follows that the applicant has not established any counter-claim, set-off or cross demand, or any defect in the bankruptcy notice, which could support an order setting aside the bankruptcy notice. The application is, with respect, completely unmeritorious.

59    The application to set aside the bankruptcy notice should be refused. As CLL has indicated that it may apply for indemnity costs against the applicant, I have included orders which allow CLL an opportunity to make such an application. However, in the event that CLL does not make such an application, I have made orders requiring the applicant to pay CLL its costs on a party/party basis. I note, by way of explanation, that indemnity costs “serve the purpose of compensating a party fully for costs incurred, as a normal [party/party] costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659 at [20] (Gray J, Carr J agreeing at [26], Goldberg J agreeing at [27]) (emphasis added).

Associate:

Dated:    6 March 2026