Federal Court of Australia

Kovacic v Sinna, in the matter of Kovacic [2026] FCA 702

ORDERS

THE COURT ORDERS THAT:

1.    The applicant’s application for review of the sequestration order made against his estate on 31 July 2025 be allowed.

2.    The sequestration order be set aside and the creditor’s petition be dismissed.

3.    The applicant’s interlocutory application dated 21 August 2025 otherwise be dismissed.

4.    There be no order as to costs.

5.    The respondent’s solicitor provide a copy of this judgment to the Official Receiver within 2 business days of today.

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

REASONS FOR JUDGMENT

BEACH J:

1    On the creditor’s petition of Mr Pushpa Sinna, on 31 July 2025 a Registrar of this Court made a sequestration order against the estate of Mr Zoran Kovacic. The Registrar’s order noted that the petition was based on an act of bankruptcy which had occurred on 3 February 2025. The act of bankruptcy concerned Mr Kovacic’s failure to comply with a bankruptcy notice that had been served on him on 13 January 2025. The bankruptcy notice was based upon a judgment debt arising out of an order made against Mr Kovacic on 15 April 2024 by the Magistrates’ Court of Victoria at Dandenong in favour of Mr Sinna; that order was made apparently on the basis of Mr Kovacic having defaulted in filing a defence.

2    Mr Kovacic applied on 22 August 2025 to review and set aside the sequestration order. Originally a hearing had been listed to deal with the review on 10 October 2025. This was adjourned at Mr Kovacic’s request. The matter was relisted for 24 November 2025, but that hearing was further adjourned, again at Mr Kovacic’s request. The reason for the various postponements was related to various health concerns of Mr Kovacic. Eventually I made orders that his application be determined on the papers; Mr Kovacic was content with this course. Thereafter, the filing of written submissions by both parties occurred, although this was a protracted exercise, again due to Mr Kovacic’s health position; I should say that from time to time I was provided with several medical reports concerning his position.

3    For the reasons that follow, I would grant Mr Kovacic’s application for review and set aside the sequestration order made against his estate.

4    Let me begin by addressing the following matters.

5    First, I am not in doubt that the relevant bankruptcy notice issued on 16 December 2024 was valid and properly served on 13 January 2025. The bankruptcy notice referred to a total debt outstanding of $23,292.17 consisting of the judgment amount of $20,929.17, legal costs of $1,350.50 and interest on the judgment.

6    Second, at the time the sequestration order was made, the judgment debt had been verified. The judgment of $20,292.17 was made under the order of the Magistrates’ Court on 15 April 2024 consisting of the claim amount of $15,250.00 and pre-judgment interest of $5,679.17. Judgment had been given in these amounts by reason of Mr Kovacic’s apparent default in filing a defence in the Magistrates’ Court.

7    Third, before the Registrar there had been complying affidavits of search, verification of the debt owing and the facts on which the petition dated 10 February 2025 was based. At the time of the sequestration order it was clear that the judgment debt had not been paid.

8    Fourth, in terms of service of the petition and supporting material another Registrar of the Court had made an order on 10 July 2025 for substituted service, the terms of which were met by the petitioning creditor. But Mr Kovacic ultimately turned up before the Registrar at the hearing on 31 July 2025. Now although he complains about a failure to adjourn that hearing and a lack of procedural fairness, those points do not go very far given that I am undertaking a full de novo review. But in any event I do not consider that Mr Kovacic has any grounds for legitimate criticism concerning how the matter proceeded before the Registrar.

9    Fifth, Mr Kovacic in his interlocutory application dated 21 August 2025 at [5] to [9] made other problematic applications concerning ss 11 and 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) and article 14 of the International Covenant on Civil and Political Rights. And he complained about an absence of reasons from the Registrar and unfair treatment by the Registrar. But again none of this goes anywhere as the review before me is a hearing de novo.

Some legal principles

10    Section 52 of the Bankruptcy Act 1966 (Cth) provides:

52    Proceedings and order on creditor’s petition

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

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

(b)     service of the petition; and

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

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

…

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

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

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

it may dismiss the petition.

…

11    In Kuksal v Victorian Legal Services Board (Appeal and Interlocutory Matters) [2026] FCAFC 65, it was said by Beach, Shariff and Stellios JJ at [78] to [81]:

Section 52(1) requires the Court to be satisfied of certain procedural and related matters as to the matters stated in the creditor’s petition, whether in those respects the creditor’s petition has been verified by a person who knows the relevant facts (as set out in s 47), whether the creditor’s petition has been served, and whether the fact of the debt or debts on which the petitioning creditor relies remain owing.

Section 52(2)(b) provides for the Court to dismiss the creditor’s petition where there is “other sufficient cause” to not make the sequestration order. As Downes J explained at PJ [112], the Court:

…retains a discretion whether or not to make a sequestration order even when all of the jurisdictional requirements are established”. This discretion is unfettered, and if the respondents seeks to satisfy the Court under s 52(2) of the Bankruptcy Act that there is some “other sufficient cause” to dismiss the creditor’s petition, they bear the onus of satisfying the Court of those matters: Bechara v Bates (2021) 286 FCR 166; [2021] FCAFC 34 at [27] (Allsop CJ, Markovic and Colvin JJ).

As her Honour further explained at PJ [113]-[114], the scope of the discretion is a broad one and the Court may make a sequestration order even if the other sufficient cause is shown: relying on Toyota Finance Australia Limited v Berro [2022] FCA 497 at [33]–[34] and [37] (Burley J). In Toyota Finance, Burley J conveniently and correctly stated the applicable principles as follows at [33]–[37]: …

As pointed out in Toyota Finance at [34], it is inappropriate to catalogue or circumscribe the circumstances that may give rise to “other sufficient cause”. Those circumstances have said to include the Court, in appropriate circumstances, to “go behind” a judgment that gives rise to a debt: Liang v LV Property Investments Pty Ltd [2015] FCA 1057 at [52], [54]–[55] (Beach J). This may include, for example, circumstances where the judgment debt was obtained by default, procured or tainted with fraud or collusion or where there was an adjudication on the merits but where there are “substantial reasons” for questioning whether there is in substance a debt: Liang at [54].

12    In Liang v LV Property Investments Pty. Ltd. [2015] FCA 1057, I said at [50] to [55]:

A petitioning creditor has a prima facie right to a sequestration order once proof of the matters required by s 52(1) has been satisfied (Deputy Commissioner of Taxation v Cumins (2008) 101 ALD 78 (Cumins) at [14] per Gilmour J; Cain v Whyte (1933) 48 CLR 639 (Cain v Whyte) at 646 and 648, the Court agreeing with Henchman J; Russell v Polites Investments Pty Ltd [2012] FCA 11 (Russell v Polites) at [23] and [24] per Flick J; Rozenbes v Kronhill (1956) 95 CLR 407 at 414 per Dixon CJ and Webb and Fullagar JJ). There is no doubt that in the present case, LV Property put forward sufficient proofs to establish s 52(1). Nevertheless, there is a discretion to refuse such an order if the debtor is able to pay her debts (s 52(2)(a)) or for “other sufficient cause” (s 52(2)(b)). But the onus is on the debtor to establish either or both of the preconditions in s 52(2).

I do not need to elaborate on the principles concerning s 52(2)(a). But elaboration is necessary in relation to the concept of “other sufficient cause” under s 52(2)(b).

First, the circumstances which may constitute “other sufficient cause” are extremely variable, and it is inappropriate to catalogue or circumscribe them (Clyne v Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5 per Fisher, Morling and Wilcox JJ; Cain v Whyte at 645).

Second, even if “other sufficient cause” has been shown, that merely enlivens the Court’s discretion to refuse to make a sequestration order. The power in s 52(2) is permissive, not mandatory. Even if a debtor can bring herself within s 52(2)(b), that does not entitle her to have a sequestration order refused (Endresz v Australian Securities and Investments Commission (No 2) (2015) 228 FCR 334 at [37] per Edmonds, Gordon and Beach JJ; Russell v Polites at [24] per Flick J).

Third, a court has a discretion to go behind a judgment. This may be exercised where the judgment was:

(a)    obtained by default or compromise;

(b)    procured by or tainted with fraud or collusion; or

(c)    obtained following an adjudication on the merits where both parties appeared, but where there are substantial reasons for questioning whether there is in substance a debt.

In each case a court may go behind the judgment to ascertain whether the judgment is founded on a real debt (Corney v Brien (1951) 84 CLR 343 at 347 per Dixon, Williams, Webb and Kitto JJ; Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 (Ahern) at 147 and 148 per Davies, Lockhart and Neaves JJ). Primarily, this is a s 52(1)(c) question (Ali v Retail Decisions Pty Ltd [2012] FCA 1130 at [17] to [20] per Bromberg J), although some authorities have also brought this within s 52(2)(b). In the present case, no reason has been shown by Ms Liang to go behind the judgment debt(s) of LV Property.

13    None of these principles are in doubt. Moreover, I am satisfied on the material that the matters in s 52(1) have been established. But the question for present purposes is whether I should go behind the judgment debt and whether there is “other sufficient cause” under s 52(2)(b). In my view I should go behind the judgment debt. And having done so, in my view “other sufficient cause” has been shown such that in the exercise of my discretion, no sequestration order should have been made or should be made and the creditor’s petition should be dismissed. Let me explain.

Mr Kovacic’s case

14    Mr Kovacic says that he is not indebted personally to Mr Sinna. He accepts that an order was obtained against his company ZNR Transport Pty Ltd in the Moorabbin Magistrates’ Court on 13 March 2019 by Mr Sinna. But Mr Kovacic says that he did not in his personal capacity enter into any contract or give any personal guarantee as to the performance of ZNR Transport.

15    Now subsequently, Mr Sinna issued proceedings against Mr Kovacic personally in the Dandenong Magistrates’ Court on 14 May 2020 which was essentially a duplication of the previous claim against ZNR Transport, which was the subject of the order against that company on 13 March 2019. Mr Kovacic says that on 6 February 2020 a sequestration order was made against his estate. But he says that despite this fact, Mr Sinna continued proceedings against him without leave in accordance with s 58(3)(b) of the Act.

16    In elaboration of these matters he made the following points.

17    Mr Sinna commenced a claim against ZNR Transport on 5 February 2019 in the Moorabbin Magistrates’ Court for an amount of $15,250 relating to the purchase of a 2011 Audi A4 vehicle registration number YRF-857 by ZNR Transport.

18    Mr Sinna obtained a final order and judgment against ZNR Transport in the amount of $15,250, costs of $1564.60 and interest $154.59 on 13 March 2019 in relation to the claim filed on 5 February 2019.

19    Mr Sinna made a subsequent claim against Mr Kovacic personally in the Dandenong Magistrates’ Court which was commenced on 14 May 2020 for an essentially identical claim and amount of $15,250 and relating to the same goods, being for the purchase of a 2011 Audi A4 vehicle registration number YRF-857.

20    Mr Sinna subsequently obtained a default order and judgment against Mr Kovacic personally as a defendant in the amount of $15,250, costs of $1553.60 and interest $420.83 on 21 October 2020.

21    Mr Kovacic said that there was never any contract between himself personally and Mr Sinna. Mr Kovacic said that it was his belief that the matter was concluded when judgment and a final order were made against his company ZNR Transport.

22    Further, he says that the sale of the vehicle was made to ZNR Transport and the vehicle was registered in the name of ZNR Transport. It was never a transaction between Mr Sinna and him personally. Further, he says that there was no personal guarantee given by him either expressly or impliedly on behalf of ZNR Transport.

23    On 5 May 2022 he made an application for a re-hearing and to set aside the judgment made at the Dandenong Magistrates’ Court on 21 October 2020.

24    On 27 May 2022 the Dandenong Magistrates’ Court made an order relating to his application for re-hearing requiring various steps to be taken in the proceeding. On 23 June 2022 he filed a draft notice of defence. He also filed a further affidavit in support and an affidavit of service.

25    On 24 June 2022 a Registrar of that court granted his application for a re-hearing and set aside the default judgment against him of 21 October 2020. The orders of 24 June 2022 also adjourned the matter to a date to be fixed. But a date was never fixed.

26    He says that a re-hearing has never been set down and the first he heard or suspected anything had happened was not until he was served with documents pertaining to the present matter in the Federal Court. Upon receiving the documents he emailed the Magistrates’ Court and they told him an order had been made in his absence on 15 April 2024 and that he had failed to file a notice of defence. He could not understand why they said that because he filed his notice of defence on 23 June 2022; I note that his document was marked “draft” which perhaps may explain some of the confusion. He said that he always had every intention of pursuing the matter through a re-hearing and had complied with all orders that were set down by that Court.

27    Further, he says that on 6 February 2020 a sequestration order was made against his estate. Despite that fact, Mr Sinna commenced new proceedings against him in May 2020 and continued proceedings and did so without leave under s 58(3)(b) of the Act and obtained an order against him on 21 October 2020.

Analysis

28    Now Mr Sinna says that Mr Kovacic has not provided any proof to support his contention that the motor vehicle was purchased and registered in the name of ZNR Transport.

29    But in my view on the evidence, the Vic Roads’ records before me clearly indicate that the relevant vehicle was purchased from Mr Sinna by ZNR Transport. The cheque for the purchase money was also drawn on an account of ZNR Transport. Further, the vehicle was registered in the name of ZNR Transport. Moreover, there is no evidence whatsoever that Mr Kovacic gave any personal guarantee to Mr Sinna concerning ZNR Transport’s obligations.

30    Now Mr Sinna says that there can be no res judicata or issue estoppel that can assist Mr Kovacic arising out of the judgment against ZNR Transport. That may be so, but there is a more fundamental point. The contractual claim against ZNR Transport in the Moorabbin Magistrates’ Court had that company as the sole buyer of the vehicle (see the statement of claim dated 5 February 2018). But then later, the same claim was duplicated by Mr Sinna against Mr Kovacic who was then said to be the sole buyer (see the complaint and statement of claim date 14 May 2020 filed in the Dandenong Magistrates’ Court). Clearly, there was a fundamental inconsistency in Mr Sinna’s position.

31    I am not satisfied at all that Mr Sinna had a claim or cause of action against Mr Kovacic in relation to the vehicle. Indeed Mr Sinna did not file any evidence directly establishing any such claim from his personal knowledge. All that one had in evidence was assertions from his solicitor on instructions in an affidavit dated 9 October 2025 which were incomplete and did not explain the position concerning ZNR Transport itself or what had occurred in the Moorabbin Magistrates’ Court. The evidence before me more suggests a claim and cause of action against ZNR Transport, which merged in the judgment as against that company obtained in the Magistrates’ Court at Moorabbin.

32    Further, there is something problematic about the obtaining of the default judgment against Mr Kovacic in the Magistrates’ Court at Dandenong, which ultimately was the subject of the bankruptcy notice. The evidence before me shows very clearly that on 24 June 2022 there was an application for a re-hearing which was granted. Further, a previous default order made on 21 October 2020 was set aside.

33    Now I accept that the affidavit of a legal assistant of the lawyers for Mr Sinna affirmed on 30 July 2025 established, inter-alia, that Mr Kovacic had not made any application to set aside the relevant order of 15 April 2024 of the Magistrates’ Court; see the various emails dated 30 July 2025 passing between the Civil Co-ordinator of the Dandenong Magistrates’ Court and that legal assistant. But perhaps that is excusable. But in any event, as part of the earlier process in 2022, a draft notice of defence had been sent to that court by Mr Kovacic on 23 June 2022; in evidence as exhibits ZK4 and ZK7 are the draft notice of defence and email to that court at 1.12 pm on 23 June 2022 respectively. Clearly Mr Kovacic at all times intended to defend the matter.

34    There is therefore also a real question in my mind about the efficacy of the later 15 April 2024 default order and consequent judgment debt which was the subject of the bankruptcy notice.

35    Finally, there is also a further matter that throws doubt on the existence of the underlying claim. At the time Mr Sinna commenced proceedings in the Dandenong Magistrates’ Court against Mr Kovacic, Mr Kovacic was bankrupt. Query then whether the claim, if it existed, could only have been provable in the then bankruptcy. Further and in any event, no leave to proceed had been obtained under s 58(3)(b).

36    Now as to the latter point, Mr Sinna has belatedly sought leave to proceed nunc pro tunc. But no good reason has been demonstrated to show why I should grant such leave years after the event.

37    But in any event, and as to the former point, at the time proceedings were taken against Mr Kovacic, the claim may only have been provable in his earlier bankruptcy. But I do note that it would seem that that earlier sequestration order had been later set aside, although it would seem that he was still bankrupt as at 18 August 2021 as demonstrated by a search of the National Personal Insolvency Index kept by AFSA.

38    I do not need to further descend into this quagmire given that in my view “other sufficient cause” has been shown given that, first, I am not satisfied that Mr Sinna had an underlying claim against Mr Kovacic and, second, the 2024 default order seems to have been entered in questionable circumstances.

Conclusion

39    For the foregoing reasons I will set aside the sequestration order and make other consequential orders. In my view “other sufficient cause” has been shown under s 52(2)(b) and in the exercise of my discretion a sequestration order should not now be made and should not previously have been made.

Associate:

Dated:    5 June 2026