Re Day

The case of *Re Day* concerned an application by the respondent, Mr. Day, for an order under s 102 of the *Bankruptcy Act 1966* (Cth) to set aside a sequestration order made against his estate. The sequestration order had been made by consent on 16 December 2011, following an application by the applicant, the Commissioner of Taxation, for the recovery of outstanding tax debts. Mr. Day sought to set aside the sequestration order on the grounds that he had a "full and substantial defence" to the debt on which the sequestration order was based.

The primary legal issue before the High Court was whether the sequestration order, having been made by consent, could be set aside under s 102 of the *Bankruptcy Act* on the basis that the debt was disputed. Section 102 permits a court to set aside a sequestration order if it is satisfied that the applicant has a "full and substantial defence" to the debt. The court was required to consider the effect of a consent order in bankruptcy proceedings and the scope of the defence available under s 102 in such circumstances.

French CJ, in his judgment, held that a sequestration order made by consent is not immune from challenge under s 102 of the *Bankruptcy Act*. His Honour reasoned that the purpose of s 102 is to provide a remedy where a sequestration order has been made erroneously or unfairly, and this purpose extends to situations where the consent to the order was given under a misunderstanding or where a valid defence to the underlying debt exists. The court affirmed that the existence of a "full and substantial defence" to the debt is a question of fact to be determined by the court, and that a consent order does not preclude an inquiry into the validity of the debt itself.

The High Court allowed Mr. Day's appeal and set aside the sequestration order. The court found that Mr. Day had demonstrated a sufficient basis to argue that he had a full and substantial defence to the tax debt, and therefore the sequestration order should not have been made.