Watts v Bendigo and Adelaide Bank Limited (No. 3)

The Watts, Ghambir and Bhoji, appealed against a sequestration order made against their estates by a federal magistrate in the Federal Magistrates Court. The order was made on a creditor’s petition by the Bendigo and Adelaide Bank Limited. The Watts had been in debt to the bank for a long time, and the bank had been pursuing them through various proceedings. The federal magistrate found that the Watts had committed an act of bankruptcy within six months of the petition and that a sequestration order was appropriate. The Watts contested the order on several grounds, including the interpretation of an order extending the time for compliance with a bankruptcy notice and the meaning of “able to pay” and “other sufficient cause” in the Bankruptcy Act 1996 (Cth). The Full Court found that the federal magistrate did not err in his consideration of the evidence or in his conclusions. The Watts had not demonstrated any error of law or fact that would warrant interference with the order.

The Full Court held that the order extending the time for compliance with the bankruptcy notice was to be interpreted as extending it until the first return date of the notice of appeal, which was the date of the appeal index conference before the registrar and not the later call-over before the judge. The Full Court also held that the Watts were not able to pay their debts within the meaning of the Bankruptcy Act and that there was other sufficient cause for making a sequestration order, namely the fact that BMG, their company, was in liquidation and could not bring the proceeding without leave. The Full Court rejected the Watts’ argument that the federal magistrate gave “overwhelming significance” to the fact that BMG was in liquidation, when he merely referred to it as a relevant consideration. The Full Court also noted that the Watts had applied for leave to proceed with their claims against the bank after the sequestration order was made, which showed that they could not bring those proceedings without leave while BMG was in liquidation.