Osborne v Schembri McCluskys Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Osborne v Schembri McCluskys Pty Ltd [2025] FCA 691

Appeal from: Schembri McCluskys Pty Ltd, in the matter of Osborne (Bankrupt) v Osborne [2024] FedCFamC2G 887
File number(s): VID 1058 of 2024
Judgment of: HESPE J
Date of judgment: 26 June 2025
Catchwords: BANKRUPTCY – appeal from decision of Federal Circuit and Family Court of Australia dismissing application for review of Registrar’s decision to make sequestration orders – where primary judge found that res judicata or issue estoppel applies – primary judge erred – Court satisfied sequestration order should be made
Legislation: Bankruptcy Act 1966 (Cth) ss 43(1), 52(1), 52(2)
Cases cited:

Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; 261 CLR 132

Schembri McCluskys Pty Ltd, in the matter of Osborne (Bankrupt) v Osborne [2024] FedCFamC2G 887

Tomlinson v Ramsey Food Processing Pty Ltd [2015] HCA 28; 256 CLR 507

Wren v Mahony [1972] HCA 5; 126 CLR 212
Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 36
Date of hearing: 27 May 2025
Counsel for the Appellant: The Appellant appeared in person
Counsel for the Respondent: Mr L Magowan
Solicitor for the Respondent: Schembri McCluskys Pty Ltd

ORDERS

VID 1058 of 2024
BETWEEN:

CLINTON OSBORNE

Appellant
AND:

SCHEMBRI MCCLUSKYS PTY LTD

Respondent

ORDER MADE BY:

HESPE J

DATE OF ORDER:

26 JUNE 2025

THE COURT ORDERS THAT:

1.The appeal be dismissed.

2.There be no order as to costs.

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


REASONS FOR JUDGMENT

HESPE J:

  1. This is an appeal by the Appellant debtor (Mr Osborne) from a judgment of the Federal Circuit and Family Court of Australia, dismissing an application for review of a decision of a Judicial Registrar of that Court to make a sequestration order in respect of the estate of Mr Osborne under the Bankruptcy Act 1966 (Cth).

    BACKGROUND

  2. The background to this appeal is set out at [3]–[20] of the reasons of the primary judge: Schembri McCluskys Pty Ltd, in the matter of Osborne (Bankrupt) v Osborne [2024] FedCFamC2G 887 (PJ).

  3. The respondent creditor, Schembri McCluskys Pty Ltd (Schembri & Co), is a law firm that represented Mr Osborne in an appeal to the Supreme Court of Victoria (Court of Appeal) from criminal proceedings in the County Court of Victoria.

  4. Schembri & Co filed proceedings in the Magistrates’ Court of Victoria in relation to Mr Osborne’s non-payment of its legal fees in respect of the appeal from the County Court. On 29 July 2022, following a four day contested hearing, orders were made by the Magistrates’ Court for Mr Osborne to pay Schembri & Co the sum of $54,196.23 and interest of $11,125.62 with a stay on the orders for 30 days. Further orders were made in the Magistrates’ Court on 16 September 2022 ordering Mr Osborne to pay the costs of…

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Details
Case
[2025] FCA 691
Decision Date

CaseChat Overview and Summary

The case of Osborne v Schembri McCluskys Pty Ltd involved a creditor's application for a sequestration order against the debtor, Mr Osborne. The application was originally made to the Federal Circuit and Family Court of Australia by the creditor, Schembri McCluskys Pty Ltd, which sought to have Mr Osborne's estate sequestered due to an outstanding debt. The application was heard by a Judicial Registrar, who granted the sequestration order on 6 July 2023. Mr Osborne subsequently sought a de novo review of this decision, which was dismissed by the primary judge on 7 August 2024.

The primary legal issue before the court was whether the primary judge was correct in dismissing Mr Osborne's application for a de novo review of the sequestration order. The crux of the matter was whether the doctrine of res judicata or issue estoppel applied, which would preclude Mr Osborne from relitigating the grounds upon which the sequestration order was made. The primary judge found that these doctrines did apply, thereby dismissing the application. Mr Osborne appealed this decision, arguing that the primary judge had erred in her application of res judicata or issue estoppel.

The court held that the primary judge erred in her application of res judicata or issue estoppel. The court found that these doctrines did not preclude Mr Osborne from challenging the sequestration order in the review proceedings. The court was satisfied that the creditor had satisfied the requirements for making a sequestration order under the Bankruptcy Act, including proving the necessary elements of the creditor's petition and establishing that Mr Osborne had committed an act of bankruptcy by failing to comply with the bankruptcy notice. The court concluded that the sequestration order should stand, thereby dismissing the appeal.

ORDERS:
1. The appeal be dismissed.
2. There be no order as to costs.

Orders

Orders of the court

1. The appeal be dismissed.

2. There be no order as to costs.

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

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Orders were made by a Judicial Registrar of the Federal Circuit and Family Court of Australia on 6 July 2023 sequestering the estate of Mr Osborne. Mr Osborne’s application for a de novo review of the decision of the Judicial Registrar was dismissed by the primary judge following a hearing on 7 August 2024.DECISION OF THE PRIMARY JUDGE The primary judge recognised that in conducting the review of the Judicial Registrar’s decision, her Honour was hearing afresh the creditor’s petition for a sequestration order: PJ [27]–[28]. The onus was on the creditor to prosecute the application by satisfying the Court of proof of the matters in s 52(1) of the Bankruptcy Act. The only onus on Mr Osborne was to satisfy the Court of the matters in s 52(2) of the Bankruptcy Act. The primary judge summarised the provisions in Part IV, Div 2 of the Bankruptcy Act, including, relevantly, ss 52(1) and 52(2), which provide:(1) At the hearing of a creditor’s petition, the Court shall require proof of: (a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of that petition; and (c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. … (2)If the court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b)that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition. The primary judge recognised that jurisdiction to make a bankruptcy order exists pursuant to s 43(1) of the Bankruptcy Act where a debtor has committed “an act of bankruptcy” and at the time when the act of bankruptcy was committed, the debtor had a prescribed connection with Australia: PJ [36]. The primary judge recognised at PJ [37] that an “act of bankruptcy” includes a circumstance where a creditor:•obtained a final judgment or order (the effect of which has not been stayed) against a debtor; •has served the debtor a bankruptcy notice under the Act; and •the debtor does not, within the time fixed for such compliance (in the case of service in Australia): •comply with the requirements of the bankruptcy notice; or •satisfy the Court that they have a counter-claim, set-off or cross demand equal to or exceeding the judgment debt payable and that could not have been set up in the action or proceeding in which the judgment or order was obtained: s 40(1)(g). The primary judge was satisfied that Mr Osborne had been served with the Bankruptcy Notice: PJ [46]. The Magistrates’ Court judgment debt was for more than $10,000 and execution of the effect of that judgment had not been stayed. The primary judge was satisfied that Mr Osborne had not complied with the requirements of the Bankruptcy Notice within the requisite time and had committed an act of bankruptcy: PJ [47]. The primary judge was also satisfied that the act of bankruptcy was committed within six months before the presentation of the creditor’s petition, as required by s 44(1)(c) of the Bankruptcy Act: PJ [47]. Although the petitioning creditor held security over property of Mr Osborne, the petitioning creditor had stated in its amended Petition that it was willing to surrender the security if the sequestration order was made. The primary judge was satisfied that ss 44(2)–(4) were satisfied: PJ [48].

Ratio Decidendi

Legal Principle Established

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