Richardson v Leonard Cohen & Co

In the case of Richardson v Leonard Cohen & Co, the appellant, Richardson, appealed a judgment of the Federal Magistrates Court that made a sequestration order in relation to his estate. The sequestration order was based on a creditor's petition lodged by the respondent, Leonard Cohen & Co, a law firm. The petition relied on an act of bankruptcy committed by the appellant in failing to comply with a bankruptcy notice. The bankruptcy notice was based on a judgment of the District Court of Western Australia, which was in favour of the respondent for unpaid legal fees.

The primary issues for the court to decide were whether the primary judge erred in not going behind the District Court judgment to consider if the appellant was indeed indebted to the respondent and if the requirements of the Bankruptcy Act 1966 (Cth) were satisfied. The court held that it is not necessary for the respondent to prove that the appellant was not, in truth and reality, indebted to them. All that was required was to show that there was "substantial reason for questioning whether there is... a debt". The court further held that the allegations of champerty and maintenance, or other illegality in the terms of engagement, could not succeed or were not genuinely arguable.

The court dismissed the appeal and ordered that the appellant pay the respondent's costs of the appeal to be taxed, such costs to be paid as part of the petitioning creditor's costs out of the appellant's bankrupt estate. The court found that the primary judge exercised his discretion appropriately in declining to go behind the District Court judgment.