Kessly v Beadle as Trustee of the Bankrupt Estate of Evangelina Francisca Kessly

Mrs Kessly, a bankrupt, applied to the Federal Circuit Court of Australia for an order annulling her sequestration order on the basis that it ought not to have been made. The application followed a creditor's petition by her former legal practitioners, Bank of Commerce (BK), which was based on a judgment debt of $84,870.22. BK had obtained the debt in proceedings that were a continuation of a long-running dispute between the parties over legal costs. Mrs Kessly contended that she was solvent at the date of the sequestration order, and that the order was procured irregularly.

The primary issue for the Court was whether the sequestration order ought not to have been made. In the course of its judgment the Court considered a number of arguments raised by Mrs Kessly as to why the sequestration order ought not to have been made. These were:

1. Mrs Kessly was solvent at the date of the sequestration order, and offered to pay the amount of the debt into Court.
2. She had tendered a bank cheque for $347,000 during the hearing of the creditor's petition.
3. The 14 February 2018 judgment was irregular and liable to be set aside.
4. The creditor's petition was served on Mrs Kessly by substituted service, rather than by email.

The Court held that it was appropriate to exercise its discretion to annul the sequestration order, on the condition that Mrs Kessly pay to creditors and the trustee the amount of the debt, interest and costs. In doing so, the Court rejected each of the arguments raised by Mrs Kessly. The Court held that Mrs Kessly had not established a basis for the Court to look behind the judgments upon which the sequestration order was based. Further, the Court held that there was no basis for concluding that the sequestration order was procured irregularly.

The Court ordered that BK file and serve any submission going to the form of orders proposed in the judgment within 7 days. The applicant and intervener were ordered to file any submission in answer within 7 days thereafter. The respondent was ordered to file and serve any submission in reply within 7 days thereafter.