Federal Court of Australia

Garlick v KALX Capital Securities Pty Ltd [2026] FCA 808

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    The applicant pay the respondent’s costs to be agreed or, failing agreement, to be assessed.

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

REASONS FOR JUDGMENT

DOWNES J:

1    The applicant, Mr Christopher Garlick, brought an application pursuant to s 41(7) of the Bankruptcy Act 1966 (Cth) to set aside a bankruptcy notice dated 19 December 2025, served upon him by the respondent (KALX). Mr Garlick contended (and contends) that he has a counter-claim, set-off or cross-demand exceeding the amount of the judgment debt on which the bankruptcy notice is based within the meaning of s 40(1)(g) of the Bankruptcy Act. The application was heard by a Judicial Registrar of this Court on 11 February 2026 and was refused, with reasons given ex tempore on 7 April 2026.

2    By application filed on 28 April 2026, Mr Garlick seeks a review of the Registrar’s decision pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth) and r 3.11 of the Federal Court Rules 2011 (Cth).

3    KALX is a lender from whom Mr Garlick sought finance. A dispute exists over the circumstances in which the money was to be advanced, and in relation to the lodgement of a caveat by KALX over a property owned by Mr Garlick and located at Strawberry Road, Bonogin.

4    The debt which is the subject of the bankruptcy notice arises from an order of the Supreme Court of Queensland made on 10 April 2024 in a proceeding which was commenced by Mr Garlick on 11 March 2024. Mr Garlick had unsuccessfully applied to remove the caveat over the Bonogin property and was ordered to pay KALX’s costs of that application on the standard basis (the first proceeding). An assessment of those costs fixed the amount payable at $66,251.80, which was the subject of a further order in that proceeding dated 18 December 2025.

5    On 14 March 2024, KALX commenced separate proceedings in the Supreme Court of Queensland against Mr Garlick and a related company (the second proceeding). The relief which KALX sought includes a declaration that the respondent holds an equitable interest in the Bonogin property. By way of counter-claim in the second proceeding, which was filed on 2 April 2024, Mr Garlick sought (inter alia) the removal of the caveat, certain declaratory relief and damages on the basis that the caveat was lodged improperly. It is apparent that Mr Garlick could have sought all such relief in the first proceeding but elected not to do so (except in the case of an order that the caveat be removed which he sought in both proceedings).

6    Rule 3.02(3)(c) of the Federal Court (Bankruptcy) Rules 2016 (Cth) requires that Mr Garlick state in an affidavit in support of his application based on s 40(1)(g) why the counter-claim, set-off or cross-demand was not raised in the first proceeding. That has not been done in this case in relation to the various claims for declaratory relief and damages which Mr Garlick made in his original counter-claim in the second proceeding or which he now seeks to pursue in his recently amended counter-claim, which adds additional claims for damages (such as pursuant to s 12GF of the Australian Securities and Investments Commission Act 2001 (Cth)).

7    Perhaps in recognition of this deficiency, the primary focus of the oral argument at the hearing of the application moved away from Mr Garlick’s claims for damages and centred upon an amount of $225,000 which had been paid by Mr Garlick into the Supreme Court on 1 July 2024 pursuant to a consent order in the second proceeding which included these terms:

1.    Upon settlement of the sale of the property at 136 Strawberry Road, Bonogin QLD 4213 (Lot 84 Registered Plan 223597) (Property), the First Defendant pay into the Supreme Court of Queensland (Court), Brisbane Registry the sum of $225,000.00 (Payment).

2.    The Payment be held by the Court pending the outcome of these proceedings.

3.    Simultaneous with the Payment being made, the Plaintiff shall remove its caveat no. 722961674 (Caveat) from title of the Property.

(Emphasis removed.)

8    Mr Morris KC, who appeared for Mr Garlick, submits that Mr Garlick has a claim to the money paid into court which claim constitutes a cross-demand within the meaning of s 40(1)(g) of the Bankruptcy Act, which cross-demand exceeds the amount of the judgment debt payable under the final order made in the first proceeding and which is a cross-demand that Mr Garlick could not have raised in the first proceeding.

9    However, I am not persuaded that money which was voluntarily paid by Mr Garlick into court as the price for obtaining the removal of the caveat pursuant to an agreement reached by him with KALX constitutes a cross-demand within the meaning of s 40(1)(g). As Mr Anderson KC for KALX submits, the money paid by Mr Garlick into court remains that of Mr Garlick. Mr Garlick’s claim on that money is not a claim brought against KALX, and KALX has made no claim on that money in the second proceeding.

10    Further, Mr Garlick’s amended counterclaim seeks no relief associated with that money such as, for example, an order that the money be paid to him. Insofar as Mr Garlick’s claim to be paid that money depends upon success of his claims for the relief which is sought in the counter-claim (as Mr Morris KC contends), those other claims could have been, but were not, advanced in the first proceeding. This has the consequence that the requirements of s 40(1)(g) are not met, as noted above.

11    In any event and in relation to his claims for the relief in the amended counter-claim in the second proceeding which underpin Mr Garlick’s claim to the money paid into court, the evidence adduced by Mr Garlick does not meet the requirements of r 3.02 of the Bankruptcy Rules because he does not depose to the full details of the counter-claim, set-off or cross-demand as required: see Bhagat v Global Custodians Ltd [2002] FCAFC 51; [2002] FCA 223 at [53] (O’Loughlin, Whitlam and Marshall JJ); O’Shanassy v Wingecarribee Shire Council, in the matter of O’Shanassy [2018] FCA 1381 at [34] (Bromwich J).

12    For these reasons, the application will be dismissed. Costs should follow the event.

Associate:

Dated:    24 June 2026