Background
Alice Sammut and Paul Ciantar petitioned for a sequestration order against Wayne Lawrence’s estate under the Bankruptcy Act 1966 (Cth). Their petition relied on Lawrence’s failure to comply by 12 November 2024 with a bankruptcy notice requiring payment of $123,022.58. The notice was founded on a certificate of taxation for costs arising from longstanding litigation between the parties.
Lawrence opposed the petition, disputing service and the amount claimed, asserting a set-off or cross-claim under a 2015 deed of loan, and alleging that the proceeding was solicitor-driven and an abuse of process. He also maintained that he was solvent and offered to pay the amount specified in the notice into court. The creditors contended that his broader liabilities substantially exceeded his available cash and that he had omitted or understated judgment debts, costs liabilities, and expenses.
The Court’s Holding
Justice Younan granted the creditors’ petition and ordered that Lawrence’s estate be sequestered. The Court found that the bankruptcy notice had been validly served by courier at Lawrence’s residential address, receipt had been acknowledged, and Lawrence committed an act of bankruptcy by failing to comply by the deadline. The statutory requirements for the petition, including proof of the continuing debt and service of the petition, were satisfied.
Lawrence did not prove that he could pay his debts as they fell due. The Court found that he overstated his assets, underestimated his liabilities, provided no direct evidence of his income or ability to realise non-cash assets promptly, and could not establish solvency merely by showing an ability to meet the notice amount. Nor did he establish a genuine set-off or cross-claim likely to succeed, or substantiate his allegations of abuse of process. The creditors’ costs were ordered to be assessed and paid from the estate, while the remaining interlocutory relief was dismissed as unnecessary.
Key Takeaways
- A debtor opposing sequestration on solvency grounds must prove an ability to pay all debts as they fall due, not merely the debt specified in the bankruptcy notice.
- An asserted cross-claim must be supported by sufficient evidence showing a real claim likely to succeed and, ordinarily, a value capable of meeting or exceeding the creditor’s claim.
- After an act of bankruptcy has occurred, an offer to pay the notice amount does not compel the creditor to accept payment or prevent the Court from examining the debtor’s overall financial position.
Why It Matters
The decision underscores the evidence required from a debtor who invokes solvency or “other sufficient cause” to resist a creditor’s petition. Unsupported asset valuations, incomplete disclosure of liabilities, and an offer to discharge only the petition debt will not establish cash-flow solvency.
It also confirms that bankruptcy proceedings cannot be defeated by repeatedly advancing inadequately supported set-off or abuse-of-process allegations. Once the statutory requirements are proved, substantial and persuasive countervailing circumstances are needed to displace the creditors’ prima facie entitlement to a sequestration order.