Ritossa v RUTLAND

Ritossa (Trustee) v Rutland (Trustee) concerned an application for a sequestration order in the Federal Court of Australia. The applicant sought the order against the respondent, alleging an act of bankruptcy by non-payment of a judgment debt. The parties had previously entered into a deed of forbearance, which included provisions for the payment of legal costs.

The primary legal issues before the Court were whether payments made under the deed of forbearance should be allocated to the judgment debt, whether the judgment debt was due and owing, and alternatively, whether a specific clause within the deed constituted an unenforceable penalty. The Court was also required to consider whether there was any other sufficient cause to refuse the sequestration order.

Judge Street found no basis to conclude that the debt the subject of the judgment was not due and owing. The Court determined that a clause within the deed of forbearance, which stipulated the payment of legal costs, was not a penalty. Having found no other sufficient cause to refuse the application and in the absence of evidence demonstrating the respondent's solvency, the Court made the sequestration order.