Background
Dr Ambrosios Kambouris petitioned for Terry Paule’s bankruptcy based on a Supreme Court of New South Wales judgment requiring Paule to pay him USD8,518,852.64. After numerous adjournments, Judicial Registrar Morgan ordered on 11 June 2026 that Paule’s estate be sequestrated. Paule sought review under s 35A(5) of the Federal Court of Australia Act 1976 (Cth), which required a de novo hearing of the creditor’s petition.
Paule sought another adjournment so that he could appoint a controlling trustee and propose a personal insolvency agreement under Part X of the Bankruptcy Act 1966 (Cth). Earlier in the proceedings, he had repeatedly represented that he legally and beneficially owned an unencumbered Toorak property worth about $28 million and could satisfy the judgment debt. He later asserted that his wife had held the beneficial ownership since 2021. In cross-examination, he admitted that earlier representations to the Federal Court and the Supreme Court about his asset position had been knowingly false.
Paule said a proposed agreement, supported by a $5 million guarantee from an associated company, could return creditors about 17 cents in the dollar rather than approximately three cents in bankruptcy. Dr Kambouris opposed an adjournment. Paule did not contend that he was solvent, and it was common ground that the statutory requirements for a sequestration order had been established.
The Court’s Holding
Goodman J refused the adjournment. The Court held that Paule’s inconsistent positions and acknowledgment that he had knowingly misled two courts made his evidence unreliable. It would not serve creditors’ interests to delay the petition so they could consider a proposal dependent on representations from a debtor whose evidence the Court could not trust.
The Court also found that Paule had already received ample opportunity to use Part X. His first attempt had been set aside, a later attempt had been denied, and the creditor’s petition had been repeatedly adjourned. The public interest in resolving bankruptcy petitions promptly, Dr Kambouris’s opposition, uncertainty surrounding another creditor’s purported support, and the availability of a possible post-bankruptcy compromise under s 73 outweighed Paule’s evidence about the personal and professional consequences of bankruptcy.
Because the statutory grounds were proved, Paule did not assert solvency, and he showed no sufficient cause against sequestration, the Court dismissed his interim application and affirmed the Registrar’s orders sequestrating his estate. It also ordered that Dr Kambouris’s costs be paid from the estate and fixed them at $30,255.95, subject to the trustee’s liberty to seek variation or rescission of that amount.
Key Takeaways
- A debtor seeking to postpone a creditor’s petition for a Part X proposal must establish that an adjournment is justified in the full circumstances and serves creditors’ interests.
- Repeatedly advancing inconsistent asset-ownership positions—and admitting that prior representations were knowingly false—can cause the Court to reject the debtor’s evidence and discretionary application.
- Once the statutory requirements for sequestration are established, an insolvent debtor must show sufficient cause why the order should not be made; a proposed arrangement does not automatically displace the petitioning creditor’s prima facie entitlement.
Why It Matters
The decision underscores that bankruptcy jurisdiction protects the general body of actual and potential creditors, not merely the petitioning creditor’s private enforcement interests. Courts will scrutinize the debtor’s reliability, procedural history, prior opportunities to pursue alternatives, and the need for prompt administration before granting further delay.
It also illustrates the limited force of a last-stage Part X proposal when its supporting information depends on an unreliable debtor. Even potentially better projected returns may not justify postponement where the proposal’s factual foundation cannot be trusted and other statutory compromise mechanisms remain available after sequestration.