Federal Court of Australia

Patial v Kailash Lawyers Pty Ltd [2026] FCA 268

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application filed by the appellant on 29 September 2025 be dismissed.

2.    The appellant pay the respondent’s costs of that application, as agreed or taxed.

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

REASONS FOR JUDGMENT

GOODMAN J:

1    On 5 September 2025, Judge Obradovic of the Federal Circuit and Family Court of Australia (Division 2) made an order that the estate of the appellant, Mr Patial, be sequestrated pursuant to the Bankruptcy Act 1966 (Cth), and published her reasons for doing so: Kailash Lawyers v Patial [2025] FedCFamC2G 1432.

2    On 26 September 2025, Mr Patial filed a notice of appeal against that order.

3    On 29 September 2025, Mr Patial filed an interlocutory application, by which he seeks an order that the operation and enforcement of the sequestration order be stayed pending the final determination of the appeal. These reasons address that application, which is opposed by the respondent (Kailash).

4    The relevant principles may be summarised as follows:

(1)    a sequestration order takes immediate and automatic effect by force of the Act and there is an immediate vesting of the property of the person the subject of the sequestration order in the trustee in bankruptcy: ss 43(2) and 58(1) of the Act; Nand v Fuji Xerox Australia Pty Limited [2014] FCA 757 at [3] (Yates J); Endresz v Australian Securities and Investments Commission [2014] FCA 1139 at [8] (Beach J); Du Bray v ACW [2020] FCA 1142 at [6] to [8] (Stewart J); and Ritson v Commissioner of Police (NSW) [2021] FCAFC 208 at [64] (Allsop CJ, Lee and Downes JJ);

(2)    the Court does not have power to rescind, discharge or suspend the operation of a sequestration order: s 37(2) of the Act. Thus, a sequestration order cannot be stayed under the Act: Nand at [3]; Endresz at [10] and [20]; Du Bray at [9]; and Ritson at [63] to [64];

(3)    the Court does have power to stay “all proceedings under a sequestration order” for a period not exceeding 21 days: s 52(3) of the Act;

(4)    the Court has power under r 36.08 of the Federal Court of Australia Rules 2011 (Cth) to stay “the execution of the proceeding until an appeal is heard and determined”. The discretion is broad and generally requires the demonstration of a reason or an appropriate case to warrant the exercise of that discretion in favour of granting a stay: Powerflex Services Pty Ltd v Data Access Corporation [1996] FCA 1528; (1996) 67 FCR 65 at 66 (Burchett, Heerey and Whitlam JJ); and Endresz at [9] and [14];

(5)    where the stay is sought under r 36.08 with respect to a sequestration order:

(a)    the exercise of that power is not constrained by the 21 day time period in s 52(3) of the Act: Nand at [3];

(b)    the application should identify the proceeding or action sought to be stayed. The failure to identify such proceeding or action may be fatal to the application: Endresz at [11];

(c)    the exercise of the discretion upon such an application is informed by whether there is an arguable point on the proposed appeal; and whether the balance of convenience favours the grant of a stay: Nolten v Groeneveld Australia Pty Ltd [2011] FCA 1494 at [24] (Kenny J); and Endresz at [16];

(6)    in considering whether there is an arguable point on the proposed appeal the stay application is not an appropriate occasion for a detailed analysis of the issues that will arise upon the appeal: Bryant v Commonwealth Bank of Australia [1996] HCA 3; (1996) 134 ALR 460 at 463 (Kirby J); Du Bray at [11] and [25];

(7)    in considering the balance of convenience:

(a)    an important consideration is the fact that the status of the person the subject of the sequestration order as a bankrupt cannot be changed by the making of an order staying any proceedings under the sequestration order. As Justice Beach explained in Endresz at [20] “[t]he sequestration orders themselves cannot be stayed or suspended. Accordingly, if there is a stigma, that cannot be altered or significantly ameliorated by any stay sought. Further and in any event, an asserted deleterious effect on reputation is not a sufficient condition for a stay”. Further, as Justice Stewart explained in Du Bray at [9] “even if the appeal is successful and the sequestration order is set aside, it would have continued to operate in the interim”. Or as Justice Gleeson, then a member of this Court, explained in Quinn v O’Rourke, in the matter of O’Rourke (No 3) [2020] FCA 1160 at [14] “[t]hat change of status has now occurred. Any stay cannot undo the consequences of that change”;

(b)    the party seeking the stay should adduce evidence of real harm likely to be suffered if the application for the stay were refused, rather than making abstract submissions concerning such harm: Endresz at [22]. Such evidence may include evidence of steps foreshadowed by the trustee in bankruptcy which might cause irreparable harm (e.g. the realisation of property prior to the determination of the appeal). The absence of such evidence will be detrimental to the application (cf Dimitriou v Pineview Property Holdings Pty Ltd [2019] FCA 2123 at [13] (Markovic J)); and

(c)    the financial position of the party seeking a stay of proceedings under a sequestration order is relevant to the exercise of the discretion and in particular the question whether that party is solvent: Burns v AMP Finance Limited (ACN 002 812 704) [2005] FCA 761 at [5] (Emmett J); Liprini v Liprini [2010] FCA 1117 at [12] and [22] (Jagot J); Singh v Owners Strata Plan No. 11723 [2012] FCA 538 at [57] to [58] (Griffiths J); Endresz at [23]; Dimitriou at [13]. In Singh, Justice Griffiths stated that “[a]s has been remarked in other similar cases, the Court generally expects that … there should be evidence as to the financial position of the party seeking to stay a sequestration order”. Similarly, in James v Commonwealth Bank of Australia [2015] FCA 582; (2015) 236 FCR 379 at 391 [71], Justice Katzmann described the failure of the bankrupt to call evidence as to his financial position as “a matter which often weighs heavily against a bankrupt seeking a stay of a sequestration order”. See also, in the analogous context of a party seeking an annulment of a sequestration order, Raine v Islam, in the matter of Islam [2026] FCA 203 at [48] to [49] (Goodman J) and the cases there cited.

5    As to the existence of an arguable case on appeal, Mr Patial submitted that his notice of appeal raised serious, complex and well-articulated grounds concerning procedural irregularities, apprehended bias, denial of natural justice and jurisdictional error. For the purpose of this application, I proceed on the basis that some of the grounds set out in the notice of appeal appear to be sufficiently arguable. However, I do not accept for the purposes of this application Mr Patial’s submission that the grounds of appeal raise matters of public interest which should be ventilated in an appellate forum before the “irreversible coercive powers of the State are deployed”.

6    As to the balance of convenience, the following considerations are relevant.

7    First, the identification of the proceeding or action which will cause irreparable harm if it is not stayed pending the determination of the appeal. Mr Patial has not identified any specific proceeding or action being, or to be, taken by his trustee in bankruptcy, or by anyone else. As Justice Beach explained in Endresz at [11], the absence of such identification provides a sufficient basis to dismiss the application in limine.

8    Secondly, and in any event, the harm that Mr Patial suggests will be visited upon him absent a stay is cast at a level of abstraction that suggests there is no immediate threat of harm that will be ameliorated by the grant of a stay.

9    In this regard, many of the matters which Mr Patial has identified as matters likely to cause him irreparable harm absent a stay are matters inherent in his status as a bankrupt. For example:

(1)    the vesting of his estate in his trustee in bankruptcy, which Mr Patial says removes all control of his real and personal property, including documents and claims that may be material to pending litigation and places him under the administrative authority of a trustee, whose obligations are not aligned with preserving the appeal or resisting the bankruptcy petition;

(2)    the effect of the bankruptcy upon his ability to pursue other proceedings in which he is the plaintiff or the applicant, including proceedings NSD1016/2021, NSD491/2025 and NSD468/2025 in this Court;

(3)    the reputational consequences which flow from the publication of the fact of the bankruptcy, which Mr Patial claims create a lasting stigma and affect his personal dignity, employment prospects and ability to obtain credit;

(4)    restrictions on international travel without the consent of his trustee;

(5)    obligations to disclose income, surrender documents and attend examinations;

(6)    exposure to public and private scrutiny of his financial affairs; and

(7)    an inability to act as the director of a company.

10    For the reasons explained at [4(1)] and [4(7)(a)] above, the grant of a stay in the terms sought by Mr Patial will have no effect upon the matters described in the previous paragraph, all of which are consequences of Mr Patial’s status as a bankrupt. He will remain a bankrupt even if a stay in the terms he seeks is granted, and thus the consequences of that status will persist.

11    Mr Patial also claims that there is a risk of creditor enforcement and forced realisation of assets while the appeal is pending. Creditor enforcement cannot occur while Mr Patial is bankrupt and his assets are vested in his trustee in bankruptcy. There is no evidence that the trustee is proposing to realise assets.

12    Thirdly, Mr Patial has adduced no evidence of his financial position and thus the Court is not in a position to determine whether he is solvent. As noted at [4(7)(c)] above, this is a matter of some significance in the exercise of the discretion.

13    During the course of the hearing, there was a debate as to whether Mr Patial had filed a statement of affairs as required by s 54(1) of the Act. There was evidence from Kailash’s solicitor that as at 8 December 2025 (by which time Mr Patial had left the country), Mr Patial had not filed a statement of affairs. During the hearing, Mr Patial claimed that he had filed his statement of affairs and was prepared to tender evidence of a communication from his trustee in bankruptcy acknowledging receipt of the statement of affairs, but was not prepared to tender the statement of affairs itself. In the course of that debate, I indicated to Mr Patial that the statement of affairs may contain information relevant to the question of his financial position which in turn was relevant to the exercise of the discretion. I gave him the opportunity to reflect upon whether he wished to tender the statement of affairs. Mr Patial subsequently informed my chambers and the solicitors for Kailash that he was of the view that the statement of affairs had no relevance to the issues for determination. Thus, the Court does not have before it any evidence of Mr Patial’s current financial position and this is a matter that weighs against an exercise of the discretion in his favour.

14    I note that Mr Patial proffered an “undertaking” to the Court that he had filed his statement of affairs and that that statement of affairs had been accepted. This does not take matters any further.

15    Finally, I have had regard to the manner in which the appeal and the present application have been pursued. In this regard:

(1)    the notice of appeal was filed some 21 days after the primary judge made the sequestration order. I cannot accept Mr Patial’s submission that he acted promptly in filing the notice of appeal and the present application;

(2)    at the first case management hearing on 29 October 2025, the present application was listed for hearing on 11 December 2025. Orders were also made for the filing of written submissions. Mr Patial filed written submissions on 12 November 2025 and Kailash filed written submissions on 26 November 2025;

(3)    Mr Patial did not appear at the 11 December 2025 hearing because he had left Australia, having done so without having first obtained the consent of his trustee in bankruptcy, apparently contrary to s 272 of the Act. Mr Patial says that he left Australia because of a family emergency, the nature of which has not been explained;

(4)    on 11 December 2025, the Court made orders:

(a)    vacating the hearing of the present application;

(b)    re-scheduling that hearing for 5 February 2026;

(5)    on 31 December 2025, Mr Patial filed an interlocutory application (31 December 2025 interlocutory application), seeking orders that:

(a)    the orders made on 11 December 2025 in his absence be set aside;

(b)    the present application and the appeal itself both be stayed pending the finalisation of an application before the primary judge which was listed for hearing on 17 February 2026;

(6)    in his affidavit in support of the 31 December 2025 interlocutory application, Mr Patial stated: “[t]he orders sought to be varied do not concern any urgent or interlocutory relief requiring immediate adjudication”;

(7)    on 5 February 2026, Mr Patial again did not appear and the Court made orders:

(a)    vacating the hearing of the present application;

(b)    re-scheduling that hearing for 11 March 2026;

(c)    listing Mr Patial’s 31 December 2025 interlocutory application for hearing at the same time;

(8)    at the hearing of the present application on 11 March 2025:

(a)    Mr Patial did not press his 31 December 2025 interlocutory application; and

(b)    the appeal was set down for final hearing on 11 May 2025.

16    The events recounted above demonstrate a distinct lack of urgency on the part of Mr Patial in the pursuit of the present application. When I raised this issue with Mr Patial, he submitted that the delay was due solely to the family emergency which necessitated his departure from Australia and the need to prioritise the interests of his family. As noted earlier, there is no evidence concerning this family emergency other than a bald statement that there was one. Even assuming, favourably to Mr Patial, that there was such an emergency there remains a distinct lack of urgency in the pursuit of the present application. In particular: (1) while he was in India, Mr Patial was able to file the 31 December 2025 interlocutory application, together with a supporting affidavit that he made; (2) the orders sought in that interlocutory application included the stay of the present application (i.e. a stay of his application for a stay) and of the appeal itself; (3) his supporting affidavit expressly stated that there was no urgent or interlocutory relief requiring immediate adjudication; and (4) the 31 December 2025 interlocutory application was on foot until the hearing on 11 March 2026, when Mr Patial indicated that he no longer pursued it.

17    The lack of urgency counts against an exercise of the discretion favourable to Mr Patial in two ways: (1) a party seeking a stay should act promptly; and (2) the fact of delay tells against the proposition that the party seeking the stay is suffering harm that can only be cured by a stay.

18    Part of the above chronology includes Mr Patial’s departure from Australia apparently contrary to s 272 of the Act. No explanation has been proffered as to this conduct (and why permission was not obtained) other than the assertion that there was a family emergency.

19    For all of the reasons set out above, the application must be dismissed. There is no apparent reason why costs should not follow the event. I will make orders accordingly.

Associate:

Dated:    13 March 2026