Background
Joy Thomas and Barney Glover obtained a $13,000 lump-sum costs order against Vincent Ejueyitsi after the District Court of New South Wales dismissed his appeal in litigation concerning his enrolment at Western Sydney University. After demands went unpaid, the creditors obtained a bankruptcy notice. Their process server said he personally served Ejueyitsi at his home on 14 June 2024, but Ejueyitsi and his friend Julie Aitken said they were dining together at Darling Harbour at the relevant time.
The creditors later petitioned for a sequestration order. A Federal Court registrar made the order, and Ejueyitsi sought de novo review. Following a hearing at which the relevant witnesses were cross-examined, the primary judge accepted the process server’s evidence, found the bankruptcy notice had been personally served, and concluded that Ejueyitsi had not proved he could pay all his debts on a cash-flow basis. The judge therefore made a sequestration order over his estate.
The Court’s Holding
The Full Court dismissed Ejueyitsi’s appeal. It found no error in the primary judge’s conclusion that personal service occurred. The proposition that Aitken had not dined with Ejueyitsi on 14 June had been squarely put to her, so the rule in Browne v Dunn was not breached. The primary judge was entitled to regard Aitken as honest but mistaken about the date and to prefer the process server’s evidence after assessing the evidence as a whole.
The Full Court also rejected Ejueyitsi’s argument that solvency should have been assessed as at the registrar’s earlier hearing. A de novo review requires a complete rehearing on the facts and law existing when the judge conducts the review. Under s 52(2)(a) of the Bankruptcy Act 1966 (Cth), the debtor must prove a present ability to pay all debts, not merely the petition debt.
Ejueyitsi’s evidence did not establish cash-flow solvency. Although he relied on bank funds exceeding the $13,000 petition debt, the evidence left unresolved his overall income, tax and HECS liabilities, child-support position, bank accounts, property equity, mortgage obligations, rent, and other expenses. The primary judge’s discretion to maintain the sequestration order did not miscarry.
Key Takeaways
- A de novo review of a registrar’s sequestration order assesses the facts and law as they exist when the judge hears the review, rather than only at the date of the registrar’s decision.
- A debtor resisting sequestration under s 52(2)(a) must provide probative evidence of an ability to pay all debts on a cash-flow basis; showing funds sufficient to pay the petition debt alone is not enough.
- The rule in Browne v Dunn requires a fair opportunity to answer an adverse case, but does not require every possible reason for rejecting a witness’s recollection to be put separately.
Why It Matters
The decision clarifies the temporal focus of solvency inquiries on de novo review and underscores that bankruptcy proceedings examine a debtor’s overall capacity to meet liabilities as they fall due. Debtors cannot defeat a petition merely by identifying cash sufficient to satisfy the judgment debt while leaving their broader financial position inadequately documented.
It also illustrates the latitude afforded to trial judges when resolving conflicting service evidence. An appellate court will not overturn findings based on a careful assessment of witness testimony and surrounding circumstances merely because an honest witness’s recollection could support a different conclusion.