Cox (Administrator) v Mahommed

Case [2025] FCA 1063

FEDERAL COURT OF AUSTRALIA

Cox (Administrator) v Mahommed [2025] FCA 1063  

File number(s): NSD 970 of 2023
Judgment of: YOUNAN J
Date of judgment: 5 September 2025
Date of publication of reasons: 19 September 2025
Catchwords:

BANKRUPTCY AND INSOLVENCY – creditor’s petition for a sequestration order against the respondent debtor under s 43 of the Bankruptcy Act 1966 (Cth) – where failure to comply with bankruptcy notice – whether act of bankruptcy under s 40(1)(g) of the Bankruptcy Act 1966 (Cth) – whether “other sufficient cause” sequestration order should not be made under s 52(2)(b) of the Bankruptcy Act 1966 (Cth) – petition granted

PRACTICE AND PROCEDURE – application by respondent debtor for adjournment or stay of petition until final determination of related proceedings – where no further extension of expiration period permitted – application dismissed

Legislation:

Bankruptcy Act1966 (Cth) ss 40, 40(1)(g), 40(1)(g)(i), 43, 43(1), 43(1)(a), 43(1)(b), 44(1), 44(1)(a), 44(1)(c), 44(2), 44(3), 47, 47(1), 49, 51, 52, 52(1), 52(1)(a), 52(1)(b), 52(1)(c), 52(2), 52(2)(a), 52(2)(b), 52(4), 52(5), 109, 109(1), 109(1)(a), 115(1), 116(1), 153A, 153A(1), 153B(1), 156A, 156A(1)(a), 244, 244(11), 244(12), 306(1)

Bankruptcy Regulations2021 (Cth) reg 10A

Federal Court (Bankruptcy) Rules 2016 (Cth) rr 4.02, 4.04, 4.04(1)(a)(i), 4.05, 4.05(a), 4.06, 4.06(3), 4.06(3)(a), 4.06(3)(b), 4.06(3)(c), 4.06(4), 4.06(5), 39.05(f)

Federal Court Rules 2011 (Cth) r 39.05(f)

Limitation Act 1969 (NSW)

Real Property Act 1900 (NSW) s 141
Cases cited:

Ahern v DCT (Qld) (1987) 76 ALR 137

Baker v Perpetual Trustee Co Ltd (2012) 204 FCR 593

Byrnes v Kendle (2011) 243 CLR 253

Cain v Whyte (1933) 48 CLR 639

Clapham v Commonwealth Bank of Australia [2013] FCAFC 84

Commonwealth Bank of Australia Ltd v Jordanou [2018] FCCA 2972

Commonwealth Bank of Australia v Qureshi [2009] FMCA 1111

Compton v Ramsay Health Care Australia Pty Ltd (2017) 261 CLR 132

Cusack v De Angelis [2008] FMCA 18

Dowling v Colonial Mutual Life Assurance Society Ltd (1915) 20 CLR 509

Ebert v The Union Trustee Co of Australia Ltd (1960) 104 CLR 346

Hrycenko v Hrycenko (2022) 294 FCR 233

Karen Ann Cox as Administrator of the Deceased Estate of David William Dixon [2025] HCADisp 182

King v Henderson (1898) AC 720

Ling v Enrobook Pty Ltd (1997) 74 FCR 19

Mahommed v Cox [2024] FedCFamC2G 1299

Mahommed v Cox [2025] FCA 469

Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2022] FCA 886

Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2023] FCAFC 107

Mahommed v Westpac Banking Corporation Limited & Ors [2023] HCASL 73

Mahommed v Westpac Banking Corporation Ltd (ACN 007 457 141) & Ors [2025] HCADisp 25

Re Hanby; Ex parte Flemington Central Spares Pty Ltd (1967) 10 FLR 378

Re James; Ex Parte Carter Holt Harvey Roofing (Aust) Pty Ltd (No 2) (1994) 51 FCR 14

Re Schmidt; Ex Part Anglewood Pty Ltd (1968) 13 FLR 111

Re Svir; Ex Parte Commissioner of Taxation (1998) 83 FCR 314

Re Vella; Ex parte Seymour (1983) 67 FLR 287

Rigg v…

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Cox (Administrator) v Mahommed [2025] FCA 1063
Case
[2025] FCA 1063
Decision Date

CaseChat Overview and Summary

The case of Cox (Administrator) v Mahommed involves a creditor's petition for a sequestration order against the respondent debtor under section 43 of the Bankruptcy Act 1966 (Cth). The dispute revolves around the failure to comply with a bankruptcy notice, which the petitioner argues constitutes an act of bankruptcy under section 40(1)(g) of the Bankruptcy Act. The respondent contends that a sequestration order should not be made under section 52(2)(b) of the Bankruptcy Act due to other sufficient cause. The Federal Circuit and Family Court of Australia heard the petition and an interlocutory application by the respondent for an adjournment or stay of the petition until related proceedings were finalised.

The court was required to decide whether the failure to comply with the bankruptcy notice constituted an act of bankruptcy under section 40(1)(g) of the Bankruptcy Act and whether there was "other sufficient cause" to not grant the sequestration order under section 52(2)(b) of the Bankruptcy Act. Additionally, the court needed to determine if the respondent's application for an adjournment or stay should be granted.

The court found that the failure to comply with the bankruptcy notice did indeed constitute an act of bankruptcy. The court was not satisfied that the respondent had a counterclaim, set-off, or cross-demand that equaled or exceeded the amount claimed in the Bankruptcy Notice. The court dismissed the respondent's interlocutory application for an adjournment or stay, finding that no further extension of the expiration period was permitted. Consequently, the court granted the petition and ordered the sequestration of the respondent's estate. The respondent was also ordered to pay the petitioner's costs associated with the interlocutory application and the creditor's petition.

The final orders of the court were as follows: the respondent's interlocutory application was dismissed, the respondent was ordered to pay the petitioner's costs for the interlocutory application, the estate of Peter Shah Mahommed was sequestered under section 43(1) of the Bankruptcy Act, and the petitioner's costs (of the interlocutory application and creditor's petition) were to be taxed and paid from the respondent's estate. The court noted that the act of bankruptcy occurred on 31 August 2023 and that a consent to act as trustee had been filed.

Orders

Orders of the court

1. The respondent’s interlocutory application dated 30 June 2025 be dismissed.

2. The respondent pay the applicant creditor’s costs of the interlocutory application dated 30 June 2025.

3. The estate of Peter Shah Mahommed be sequestered under s 43(1) of the Bankruptcy Act 1966 (Cth).

4. The applicant creditor’s costs (of the interlocutory application and creditor’s petition) be taxed and paid from the estate of the respondent in accordance with ss 51 and 109(1)(a) of the Bankruptcy Act 1966 (Cth).

THE COURT NOTES THAT:

1. The act of bankruptcy is 31 August 2023.

2. A consent to act as trustee signed by Bruce Gleeson has been filed under s 156A(1)(a) of the Bankruptcy Act 1966 (Cth).

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

Background

Background to the litigation

On the interlocutory application: (a)Ms Cox relies on an affidavit of Ben Thomas sworn on 11 July 2025, and its annexure, Exhibit BT-1.(b)Mr Mahommed relies upon: (i) his affidavit affirmed on 30 June 2025, and its annexure, Exhibit PSM-1; and (ii) his affidavit affirmed on 29 July 2025, and its annexure, Exhibit PSM-2.3. BACKGROUND The background to this proceeding, and the myriad related proceedings, is usefully summarised in several decisions of the Supreme Court of New South Wales (and Court of Appeal), the FCFCoA, and this Court. For convenience, those decisions and orders relevant to the present proceeding are listed, chronologically, below:(1)Ward v Westpac (unreported, Supreme Court of New South Wales, Lindsay J, 4 April 2022) (Security Application);(2)Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2022] FCA 886 (29 July 2022) (Burley J) (Bankruptcy Application);(3)Ward v Westpac Banking Corporation Ltd [2023] NSWCA 11 (15 February 2023) (Ward P, Adamson JA and Griffiths AJA) (Security Appeal);(4)Mahommed v Westpac Banking Corporation Limited & Ors [2023] HCASL 73 (11 May 2023) (Gordan and Steward JJ) (Security Special Leave Application); (5)Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2023] FCAFC 107 (14 July 2023) (Markovic, Goodman and McElwaine JJ) (Bankruptcy Application Appeal);(6)Order of Kunc J in Ward v Westpac Banking Corporation Limited (Supreme Court of New South Wales, 2020/00247595, 18 August 2023), noting the failure to give security for costs ordered on 4 April 2022, and dismissing the amended statement of claim, with costs;(7)Order of Registrar Morgan in Peter Shah Mahommed v Karen Ann Cox as Administrator of the Deceased Estate of David William Dixon (Federal Circuit and Family Court of Australia, SYG897/2023, 31 August 2023), dismissing an application to set aside the Bankruptcy Notice, with costs;(8)Ward v Westpac Banking Corporation Limited [2024] NSWSC 669 (31 May 2024) (Kunc J) (Defence Strike Out Decision);(9)Order of Kunc J in Ward v Westpac Banking Corporation Limited (Supreme Court of New South Wales, 2020/00247595, 20 June 2024), giving judgment for Westpac for possession of the Lovedale property and Maitland property, and in the amount of $2,467,266.21 against Ms Cox as administrator of the deceased estate of Mr Dixon;(10)Ward v Westpac Banking Corporation Ltd [2024] NSWCA 267 (12 November 2024) (Mitchelmore and McHugh JJA) (Defence Strike Out Appeal); (11)Mahommed v Cox [2024] FedCFamC2G 1299 (28 November 2024) (Given J) (Bankruptcy Notice Review Application);(12)Mahommed v Westpac Banking Corporation Ltd (ACN 007 457 141) & Ors [2025] HCADisp 25 (6 March 2025) (Edelman and Gleeson JJ) (Defence Strike Out Special Leave Application);(13)Mahommed v Cox [2025] FCA 469 (14 May 2025) (Markovic J) (Bankruptcy Notice Review Appeal);(14)Special Leave 2025 disposition (4 September 2025). It is necessary to provide some further detail about these matters relevant to the present applications. 3.1 Supreme Court proceeding

Evidence

Evidence Before The Court

In oral submissions, Mr Mahommed accepted that the interlocutory application was in effect an application for an indefinite or permanent stay of the proceeding. As such, the question on the petition and on the interlocutory application was, essentially, the same: namely, whether a sequestration order should be made. Mr Mahommed confirmed that the sole basis of his challenge rested upon s 52(2)(b) of the Bankruptcy Act, that “for other sufficient cause” a sequestration order ought not to be made.2. EVIDENCE Ms Cox relies upon the following affidavits in support of the petition, which were read without objection: (1)affidavit of service of Bankruptcy Notice sworn by Chris Folpp on 17 May 2023;(2)affidavit verifying creditor’s petition sworn by Karen Ann Cox on 6 September 2023;(3)affidavit of search sworn by Ben Thomas on 6 September 2023;(4)affidavit of service of creditor’s petition sworn by Sarah Folpp on 20 September 2023;(5)affidavit of Peter Shah Mahommed affirmed on 6 October 2023;(6)affidavit of debt sworn by Karen Ann Cox on 9 October 2023;(7)affidavit of search sworn by Ben Thomas on 9 October 2023;(8)affidavit of Karen Ann Cox affirmed on 9 August 2024; (9)affidavit of final debt sworn by Karen Ann Cox on 17 February 2025;(10)affidavit of final search sworn by Ben Thomas on 17 February 2025;(11)affidavit of final debt sworn by Karen Ann Cox on 23 June 2025; (12)affidavit of final search sworn by Ben Thomas on 23 June 2025;(13)affidavit of final debt sworn by Karen Ann Cox on 20 August 2025; and(14)affidavit of final search sworn by Ben Thomas on 20 August 2025. At the hearing on 21 August 2025, with a view to informing the Court of Mr Mahommed’s financial position, Ms Cox tendered the Orders of Williams J made on 18 November 2021 in an unrelated Supreme Court proceeding, which contained an order that Mr Mahommed (with another) pay equitable compensation in the amount of $1,058,579 plus interest. At a subsequent hearing on 5 September 2025, Mr Mahommed tendered the Special Leave 2025 disposition. In the petition, Mr Mahommed relies upon his affidavit affirmed on 6 October 2023 and its annexures, Exhibit PSM-4 and Exhibit PSM-5 (although the latter, containing the Index and Court Book for Supreme Court proceeding 2020/00247595, was not uploaded on the Court file), in support of the notice of opposition. On the interlocutory application: (a)Ms Cox relies on an affidavit of Ben Thomas sworn on 11 July 2025, and its annexure, Exhibit BT-1.(b)Mr Mahommed relies upon: (i) his affidavit affirmed on 30 June 2025, and its annexure, Exhibit PSM-1; and (ii) his affidavit affirmed on 29 July 2025, and its annexure, Exhibit PSM-2.3. BACKGROUND The background to this proceeding, and the myriad related proceedings, is usefully summarised in several decisions of the Supreme Court of New South Wales (and Court of Appeal), the FCFCoA, and this Court. For convenience, those decisions and orders relevant to the present proceeding are listed, chronologically, below:(1)Ward v Westpac (unreported, Supreme Court of New South Wales, Lindsay J, 4 April 2022) (Security Application);(2)Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2022] FCA 886 (29 July 2022) (Burley J) (Bankruptcy Application);(3)Ward v Westpac Banking Corporation Ltd [2023] NSWCA 11 (15 February 2023) (Ward P, Adamson JA and Griffiths AJA) (Security Appeal);(4)Mahommed v Westpac Banking Corporation Limited & Ors [2023] HCASL 73 (11 May 2023) (Gordan and Steward JJ) (Security Special Leave Application); (5)Mahommed v Cox as Administrator of the Deceased Estate of Dixon [2023] FCAFC 107 (14 July 2023) (Markovic, Goodman and McElwaine JJ) (Bankruptcy Application Appeal);(6)Order of Kunc J in Ward v Westpac Banking Corporation Limited (Supreme Court of New South Wales, 2020/00247595, 18 August 2023), noting the failure to give security for costs ordered on 4 April 2022, and dismissing the amended statement of claim, with costs;(7)Order of Registrar Morgan in Peter Shah Mahommed v Karen Ann Cox as Administrator of the Deceased Estate of David William Dixon (Federal Circuit and Family Court of Australia, SYG897/2023, 31 August 2023), dismissing an application to set aside the Bankruptcy Notice, with costs;(8)Ward v Westpac Banking Corporation Limited [2024] NSWSC 669 (31 May 2024) (Kunc J) (Defence Strike Out Decision);(9)Order of Kunc J in Ward v Westpac Banking Corporation Limited (Supreme Court of New South Wales, 2020/00247595, 20 June 2024), giving judgment for Westpac for possession of the Lovedale property and Maitland property, and in the amount of $2,467,266.21 against Ms Cox as administrator of the deceased estate of Mr Dixon;(10)Ward v Westpac Banking Corporation Ltd [2024] NSWCA 267 (12 November 2024) (Mitchelmore and McHugh JJA) (Defence Strike Out Appeal); (11)Mahommed v Cox [2024] FedCFamC2G 1299 (28 November 2024) (Given J) (Bankruptcy Notice Review Application);(12)Mahommed v Westpac Banking Corporation Ltd (ACN 007 457 141) & Ors [2025] HCADisp 25 (6 March 2025) (Edelman and Gleeson JJ) (Defence Strike Out Special Leave Application);(13)Mahommed v Cox [2025] FCA 469 (14 May 2025) (Markovic J) (Bankruptcy Notice Review Appeal);(14)Special Leave 2025 disposition (4 September 2025).

Decision

Reasons for decision

On 31 August 2023, a Registrar made orders dismissing Mr Mahommed’s application and awarding costs to Ms Cox in the amount of $28,598.94. This became the second debt claimed under the petition. 3.6 Defence Strike Out Decision and Strike Out Appeal On 31 May 2024, the plaintiffs’ defence to a cross-claim filed by Westpac in the Supreme Court proceeding was struck out as an abuse of process, without leave to replead: Ward v Westpac Banking Corporation Limited [2024] NSWSC 669. The plaintiffs were thus removed as parties to the cross-claim, and Westpac and Ms Cox agreed orders for resolution of the dispute. Judgment for possession of the Maitland and Lovedale properties was granted in favour of Westpac, with leave to apply for the issue of writs of possession. That leave was stayed pending the determination of any application by the plaintiffs for leave to appeal. By a summons filed 18 July 2024, the plaintiffs sought leave to appeal from the judgment and orders of Kunc J in the Supreme Court. On 12 November 2024, the summons was dismissed by the Court of Appeal, with costs in favour of Ms Cox, and the stay (granted by Kunc J apropos the leave granted to Westpac to apply for writs of possession) discharged: Ward v Westpac Banking Corporation Limited [2024] NSWCA 267. On 12 December 2024, Mr Mahommed filed an amended application for special leave to appeal from the judgment of the Court of Appeal, which was refused by the High Court on 6 March 2025. 3.7 Bankruptcy Notice Review Application and Appeal On 19 September 2023, while the Supreme Court proceeding continued, Mr Mahommed filed an application in the FCFCoA for review of the Registrar’s orders dismissing the application to set aside the Bankruptcy Notice (with costs in the amount of $28,598.94). In a de novo review, Given J dismissed the application with costs on 28 November 2024: Mahommed v Cox [2024] FedCFamC2G 1299. Her Honour set out the grounds of review (at [24]-[25]), as follows (noting the second reference to “Ground 4” is likely a typographical error, as observed by Markovic J in Mahommed v Cox [2025] FCA 469 at [19]):24The originating application contained seven grounds. The first ground simply says that the applicant claims multiple rights of counterclaim, set-off or cross demand, the value of each of which is claimed to exceed the amount of the judgment debt. The second ground, together with its particulars, asserts that no counter-claim was “set up” or is capable of being established by the applicant in his proceedings before the Federal Court. Ground 7 simply repeats the relief sought (see [14] above).25 Accordingly, it is only truly grounds 3 to 6 of the originating application which set out the applicant’s alleged entitlement to relief. Those grounds can be summarised as follows:(a) Ground 3 – a liquidated debt in the amount of $1,472,379.70, allegedly owed to the applicant by the deceased and was the subject of written demands for payment that were not contested (first counter-claim).(b) Ground 4 – a liquidated debt in the amount of $1,400,000 plus interest allegedly owed to the applicant by the deceased, said to have been the subject of written demands for payment (second counter-claim).(c) Ground 5 – “wrongful conduct” on the part of the respondent in respect of the Lovedale Property which has allegedly caused the applicant to lose the net present value of the Lovedale Property (third counter-claim). The FCA judgment records the value of the Lovedale property as being estimated at $1,500,000.(d) Ground 4 – because of the “wrongful conduct” of the respondent in respect of the Maitland Property the applicant is unable to recover, and claims loss to the net present value of and his rights to occupy and possess the Maitland Property (fourth counterclaim). The FCA judgment records the value of the Lovedale property as being estimated at $450,000.(collectively, the counter-claims).(Emphasis in original, footnotes omitted.)

Ratio Decidendi

Legal Principle Established

Grounds 5-7, pertaining to alleged defects in the petition, and ground 8, regarding the application of s 52(2)(b) of the Bankruptcy Act, remain in issue.7.1 Can the sequestration order be made? The first question is whether the Court is satisfied with the proof of the matters in s 52(1) of the Bankruptcy Act. There was no contest on this question. I am satisfied:(a)of the matters stated in the petition, for which purpose I accept as sufficient the affidavit verifying the petition sworn by Ms Cox on 6 September 2023: Bankruptcy Act s 52(1)(a);(b)that the petition was served on Mr Mahommed, as evidenced in the affidavit of service of creditor’s petition sworn by Sarah Folpp on 20 September 2023: Bankruptcy Act s 52(1)(b); Bankruptcy Rules r 4.05(a); and(c)that each debt on which the creditor relies is still owing, as evidenced in the affidavit of final debt sworn by Karen Ann Cox on 20 August 2025, filed the day before the hearing: Bankruptcy Act s 52(1)(c); Bankruptcy Rules r 4.06(4). In relation to the matters stated in the petition, I accept that Mr Mahommed failed within 21 days of service of the Bankruptcy Notice (which time was extended to 31 August 2023) to pay the debt owed to the applicant creditor (viz., a judgment debt of $25,900 and a lump sum costs order of $28,598.94), or make an arrangement to the creditor’s satisfaction for payment of the debt, as stipulated in paragraph 1 of the Bankruptcy Notice. I am satisfied that the act of bankruptcy occurred on 31 August 2023, by way of the failure to comply with the requirements of the Bankruptcy Notice: Bankruptcy Act s 40(1)(g). Mr Mahommed did not contest his failure to comply with the notice. While Mr Mahommed did not take issue with any matter in s 52(1) of the Bankruptcy Act, and indicated at the hearing that his challenge was based solely on s 52(2)(b), ground 6 of the notice of opposition claimed that the petition is not founded upon an available act of bankruptcy within the meaning of s 40(1)(g) of the Bankruptcy Act. Consistently with Mr Mahommed’s oral submissions, I take that challenge to be one of the assertion of a counter-claim, set-off or cross demand equal to or more than the sum claimed in the Bankruptcy Notice, that Mr Mahommed could not have set up in the action or proceeding in which the judgment or order was obtained: Bankruptcy Act s 40(1)(g). I am not satisfied of such a counter-claim, set-off or cross demand, despite multiple proceedings in which the question of Mr Mahommed’s interest in the Maitland property has been raised (e.g., Supreme Court proceeding 2020/00247595; [2021] NSWSC 1178; [2022] FCA 886; [2023] NSWCA 11; [2024] NSWSC 669; [2024] FedCFamC2G 1299; [2024] NSWCA 267; [2025] FCA 469). Mr Mahommed claims that the question of ownership of the Maitland property has never been determined. That is a partial truth – often repeated by Mr Mahommed – which belies the fact that Mr Mahommed had the chance to prosecute his claim for ownership of the property, which claim was dismissed by Lindsay J in the Supreme Court for failure to provide security for costs, having considered an argument as to stultification in making those orders.