B Pty Ltd v Sutton

In B Pty Ltd v Sutton, heard in the Federal Circuit Court of Australia, the applicant creditor sought the sequestration of the respondent debtor's estate based on a failure to comply with a bankruptcy notice. The respondent opposed the creditor's petition on several grounds, including that freezing orders in place prevented compliance with the bankruptcy notice, that he was able to pay his debts, and that an appeal pending in the Family Court of Australia constituted sufficient cause for not making a sequestration order. The respondent also sought an adjournment of the hearing to prepare further evidence and await the outcome of the Family Court appeal.

The court was required to determine whether the freezing orders in force created an implied stay of execution of the judgment upon which the bankruptcy notice was based, thereby excusing the debtor's non-compliance. Additionally, the court had to consider whether the debtor had discharged the onus of proving he could and would have complied with the bankruptcy notice but for the freezing orders. The court also needed to assess whether the debtor had proven he was able to pay his debts and whether his pending appeal in the Family Court presented a sufficient cause to prevent the making of a sequestration order. Finally, the court had to decide whether granting an adjournment would serve any utility in light of the other issues.

The court reasoned that the freezing orders did not create an implied stay of execution of the judgment, and therefore, the respondent's non-compliance with the bankruptcy notice constituted an act of bankruptcy. The court found that the respondent had not discharged the burden of proving that, absent the freezing orders, he could and would have complied with the bankruptcy notice. Furthermore, the court determined that the respondent had not demonstrated he was able to pay his debts and that his pending appeal in the Family Court did not offer reasonable prospects of success as a ground for opposing the sequestration order. Consequently, the court concluded that there would be no utility in granting an adjournment.

Accordingly, the court dismissed the respondent's applications to adjourn the hearing and to rely on the pending appeal as a ground of opposition. The court ordered the sequestration of the respondent's estate and directed that the applicant creditor's costs be paid from the estate. The date of the act of bankruptcy was noted as 9 December 2019.