Yeo (Trustee), in the matter of Trim (Bankrupt) v Trim
[2025] FedCFamC2G 1307
•15 August 2025
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Yeo (Trustee), in the matter of Trim (Bankrupt) v Trim [2025] FedCFamC2G 1307
File number: MLG 2321 of 2023 Judgment of: JUDGE FORBES Date of judgment: 15 August 2025 Catchwords: BANKRUPTCY – application to review a sequestration order made by a registrar – de novo hearing of creditor’s petition – alleged act of bankruptcy being failure to comply with a bankruptcy notice –– whether creditors petition invalid for non-compliance with rules – where no affidavit of debt or affidavit of search - whether bankruptcy notice meets the essential requirements of the Act – whether bankruptcy notice liable to mislead – where interest claimed on debt calculated by reference to collateral agreement – whether bankruptcy notice conflates separate claims – whether debtor is solvent – debtor entitled to relief - bankruptcy notice and sequestration order to be set aside Legislation: Bankruptcy Act 1966 (Cth) ss 33(1)(b), 41(5), 52, 52(1), 52(2), 306
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 256(1)
Federal Circuit Court of Australia Act 1999 (Cth) s 77
Federal Court of Australia Act 1976 (Cth) s 52(2)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) r 4.06
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 17.05, 17.05(2)(g)
Federal Circuit Court Rules 2001 (Cth) rr 26.01, 39.06
Federal Court Rules 2011 (Cth) r 39.06
Penalty Interest Rates Act 1986 (Vic) s 2
Cases cited: Adams v Lambert (2006) 228 CLR 409
BWK Elders (Australia) Pty Ltd v White (2004) 3 ABC (NS) 70
Emerson v Wreckair Pty Ltd (1992) 33 FCR 581
GR Finance Ltd v Waldron [2009] FMCA 418
International Alpaca Management Ltd v Ensor [1999] FCA 72
Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71
Martin and Another v Commonwealth Bank of Australia (2001) 217 ALR 634
Northam v Commonwealth Bank of Australia [1999] FCA 544
Re a Judgment Debtor [1908] 2 KB 474
Sandell v Porter (1966) 115 CLR 666
Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 87 FCR 120
Skouloudis v St George Bank Ltd (2008) 173 FCR 236
St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094
Stec v Orfanos [1999] FCA 457
The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33
Totev v Sfar (2008) 167 FCR 193
Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337
Division: Division 2 General Federal Law Number of paragraphs: 114 Date of last submission/s: 20 December 2024 Date of hearing: 20 December 2024 Place: Melbourne Counsel for the Applicants: Ms Griffiths Solicitor for the Applicants: Lewis Holdway Lawyers Counsel for the supporting creditor: Mr Rowley Solicitor for the Supporting Creditor: Charlton Rowley Counsel for the Respondent: Mr Baillie Solicitor for the Respondent: Adco Legal Pty Ltd Counsel for the Interested party: Mr Quin ORDERS
MLG 2321 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF MATTHEW DARREN TRIM
BETWEEN: ANDREW REGINALD YEO
First Applicant
GESS RAMBALDI
Second Applicant
LTAK INVESTMENTS PTY LTD
Supporting Creditor
AND: MATTHEW DARREN TRIM
Respondent
ORDER MADE BY:
JUDGE FORBES
DATE OF ORDER:
15 AUGUST 2025
THE COURT ORDERS THAT:
1.The creditor’s petition filed on 21 December 2023, as amended on 23 July 2024, be dismissed.
2.The sequestration order made on 3 October 2024 by Registrar Edwards be set aside.
3.Any party seeking costs in relation to this proceeding file and serve on all other parties a written submission (not exceeding 5 pages) in support of their application by no later than 4.00pm on 29 August 2025. Such submission must include a schedule of costs claimed and should address the basis on which costs are sought.
4.A party against whom costs are sought may file and serve on all other parties a reply (not exceeding 3 pages) by no later than 4.00pm on 12 September 2025.
5.Unless otherwise ordered, any applications for costs will be determined on the papers.
AND THE COURT NOTES THAT:
A.The Trustee of the bankrupt estate of Matthew Trim appeared in the proceeding as an Interested Party and sought to be heard on the question of costs in the event the sequestration order was set aside. The Interested Party may also file and serve an application for costs in accordance with the orders above.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE FORBES
INTRODUCTION
On 3 October 2024, a registrar of this court made an order pursuant to section 52 of the Bankruptcy Act 1966 (Cth) (the Act) sequestrating the estate of Matthew Darren Trim. The creditor’s petition relied upon Mr Trim’s failure to comply with a bankruptcy notice dated 9 August 2023 and served on 23 August 2023 (the Bankruptcy Notice) as the relevant act of bankruptcy.
Mr Trim has applied for a review of the registrar’s decision. Mr Trim contends that the Bankruptcy Notice contains a number of material errors or omissions which, taken separately or in combination, render the Bankruptcy Notice a nullity and require that the creditor’s petition be dismissed.
As I explain in these reasons, Mr Trim argues that the Bankruptcy Notice fails to meet requirements made essential by the Act or, alternatively, could reasonably mislead a debtor as to what is necessary to comply with the notice. He contends, in the alternative, that even if the Bankruptcy Notice is found to be valid, the debt relied upon in the creditor’s petition is not due and he is, in any event, solvent and able to pay his debts.
Mr Trim seeks a dismissal of the sequestration order. I am persuaded, for the reasons set out in this judgment, that the respondent is entitled to the relief he seeks.
BACKGROUND
The petitioning creditors, Mr Andrew Reginald Yeo and Ms Gess Rambaldi, are the Trustees of the estate of Mr Russell Trim, a bankrupt. The debtor is Mr Darren Trim.
On 19 March 2018, the parties entered into a settlement agreement pursuant to which Mr Trim agreed to pay to the petitioning creditors the sum of $100,000.
On 19 June 2018, Mr Trim defaulted on that settlement agreement.
On 18 April 2019, by Order of Judge Heffernan in the Federal Circuit and Family Court of Australia, the petitioning creditors obtained a judgment against Mr Trim for the sum of $78,000 (the Judgment Debt) plus interest, plus costs.
Approximately 9 months later, on or around 4 February 2020, the parties entered into a Deed of Forbearance (the Forbearance Deed) in respect of the Judgment Debt, pursuant to which Mr Trim agreed to pay the sum of $93,000 to the petitioning creditors, a sum inclusive of the Judgment Debt, costs and interest. The Forbearance Deed provided for payment to be made in three instalments[1] as follows:
(1)$38,000 to be payable within 7 days of the execution of the Forbearance Deed, namely 11 February 2020;
(2)$40,000 to be payable on or before 17 March 2020; and
(3)$15,000 to be payable on or before 31 March 2020.
[1] Affidavit of Rebecca Jane Rayner affirmed 28 November 2024, Annexure 2, Deed of Forbearance, cl 4.1
As will be discussed later, clause 7.2.1 of the Forbearance Deed deals with default of payment and states:
7.2 the Debtor acknowledges and agrees that:
7.2.1in the event of Default, interest will continue to accrue on the Trustees Claim at the rate fixed by section 2 of the Penalty Interest Rates Act 1986 (Vic).
7.2.2the Trustees reserve the right to apply any instalment payments received on any account outstanding, including in satisfaction of any outstanding legal costs and interest in priority to reduction of the Debt.
The parties agree that Mr Trim paid the first instalment of $38,000 pursuant to the Forbearance Deed. However, there is disagreement between the parties in respect of the events following the first payment.
The petitioning creditors claim that no further payments were made following the payment of the first instalment, and thereafter Mr Trim defaulted on the terms of the Forbearance Deed.
Mr Trim claims that he paid or substantially paid the balance of the monies due under the Forbearance Deed through the company C A Officers Pty Ltd (in liquidation), of which he was a director. Mr Baillie, counsel for Mr Trim, submitted that Mr Trim no longer had access to records for that company and, as at the date of the hearing, the liquidators had not supplied the necessary records to determine the amount alleged to have been paid by Mr Trim.
Following the alleged default, the petitioning creditors :
(a)applied $30,694.22 of the $38,000 received from Mr Trim towards costs in accordance with cl 7.2.2 of the Forbearance Deed;
(b)applied the balance of $7,305.78 to reduction of the Judgment Debt; and
(c)claimed interest on the Judgment Debt at the rate fixed by section 2 of the Penalty Interest Rates Act 1986 (Vic) in accordance with cl 7.2.1 of the Forbearance Deed.
The applicants issued a Bankruptcy Notice dated 8 August 2023 which they say was served on Mr Trim on 23 August 2023 by email.[2] Pursuant to the Bankruptcy Notice, the petitioning creditors claimed that Mr Trim owed a debt totalling $100,161.98, comprised of:
(1)The Judgment Debt of $78,000;
(2)Legal costs of $0.00;
(3)Interest in the amount of $29,467.76; less
(4)Payments made or credit allowed since judgment of $7,305.78.
[2] Affidavit of Charlotte Alexandra Cooper affirmed on 13 September 2024, Exhibit CAC-1
The Schedule of Post-Judgment Interest which is annexed to the Bankruptcy Notice sets out the manner in which interest has been calculated “in relation to the judgment/s or order/s accompanying this notice”. The interest component of the debt, which will be discussed later, was particularised in the Bankruptcy Notice as follows:
(1)the sum of $4,790.35 calculated from the date of judgment to 11 February 2020 on the sum of $78,000 at the rate of 7.5% pursuant to s 52(2) of the Federal Court of Australia Act 1976 (Cth) and rule 39.06 of the Federal Court Rules 2011; and
(2)the sum of $24,677.76 calculated from 12 February 2020 to 9 August 2023 on the sum of $70,694.22 at the rate of 10% pursuant to s 2 of the Penalty Interest Rates Act 1986 (Vic).
Mr Trim denies that he received a copy of the notice and has been unable to locate a copy of the email purporting to serve it.
On 21 December 2023, a creditor’s petition was filed seeking sequestration of Mr Trim’s estate. The relevant act of bankruptcy relied upon in the creditor’s petition was Mr Trim’s failure by 18 September 2023 to comply with the Bankruptcy Notice served on 23 August 2023.
On 3 July 2024, the creditor’s petition was served on Mr Trim via email, pursuant to orders made by Registrar Bird dispensing with the requirement for personal service.
On 3 October 2024, Registrar Edwards made orders which included the granting of leave for the petitioning creditors to amend the creditor’s petition such that 13 August 2024 was deemed to be the date of the commission of the act of bankruptcy. The Registrar also ordered that Mr Trim’s estate be sequestrated pursuant to the Act.
Pursuant to the order for sequestration, Mr David Charles Quin was appointed as trustee of Mr Trim’s bankrupt estate.
Application for review
On 24 October 2024, Mr Trim filed an application for a review of the Registrar’s decision. Mr Trim seeks orders that the Creditor’s Petition be dismissed and the sequestration order be set aside. Mr Trim also seeks a declaration that he not have the status of a former bankrupt.
The review application was heard on 20 December 2024 by videoconference. Ms K Griffiths appeared for the applicants in the substantive proceeding (the respondents in the review), Mr A Baillee appeared for Mr Trim (the applicant in the review), Mr L Rowley appeared for the supporting creditor, LTAK Investments, and Mr Quin appeared as the trustee of Mr Trim’s bankrupt estate, as an interested party.
Prior to the hearing the parties were afforded the opportunity to file affidavits on which they intended to rely and outlines of submissions. A number of affidavits were filed and none of the deponents were required for cross-examination. Outlines were filed by Ms Griffiths and Mr Baillie and these were developed orally at the hearing.
Mr Quin was excused from the hearing after explaining his interest, but reserved the right to be heard on the question of costs in the event the bankrupt, Mr Trim, was successful in setting aside the sequestration order.
Grounds of Review
In short compass, Mr Trim contends that the sequestration order made by the Registrar on 3 October 2024 should be set aside for one or more of the following reasons:
(1)in the present proceeding, which is a de novo rehearing of the sequestration application, the petitioning creditor has failed to meet the requirements for the making of an order pursuant to section 52 of the Bankruptcy Act. In particular, the petitioning creditor has failed to comply with the mandatory requirements of rule 4.06 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (the Bankruptcy Rules) which requires the filing of an affidavit of debt and an affidavit of search prior to the hearing of the petition;
(2)the Bankruptcy Notice on which the petitioning creditor relies (BN261197) is invalid such that Mr Trim cannot be found to have committed an act of bankruptcy. Mr Trim relies on three separate grounds of invalidity;
(a)identification of the wrong legislation in relation to the calculation of interest on the judgment debt;
(b)incorrect calculation of the proper rate of interest to apply for the relevant period; and
(c)the petitioning creditor’s failure to properly account for payments made subsequent to the judgment.
Taken separately, or in combination, Mr Trim submits that these errors are such that the Bankruptcy Notice is invalid because it fails to meet a requirement made essential by the Act or, alternatively, could reasonably mislead a debtor as to what is necessary to comply with the notice. In the circumstances, it is submitted that the Bankruptcy Notice is a nullity and the Creditor’s Petition must be dismissed.
(3)further, and in any event, Mr Trim claims to be solvent and able to meet his debts, and the court should exercise its discretion to dismiss the creditor’s petition.
As I explain in more detail below, the petitioning creditor says that there is no substance to Mr Trim’s grounds and submits that the court should affirm the Registrar’s decision to make the sequestration order. The supporting creditor, LTAK, contests Mr Trim’s assertion of solvency.
Evidence and submissions relied upon
Mr Baillie read the following affidavits and material in support of his submissions on behalf of Mr Trim:
(1)Affidavit of Matthew Darren Trim sworn 24 October 2024;
(2)Affidavit of Matthew Darren Trim sworn 19 December 2024;
(3)Affidavit of Rebecca Jane Raynor sworn 28 November 2024 (but excluding paragraphs 5, 9-14 and 16-17); and
(4)Outline of submissions filed on 28 November 2024.
Ms Griffiths on behalf of the petitioning creditor relied upon the following:
(1)Affidavit of debt of Mr Andrew Yeo dated 3 October 2024;
(2)Affidavits of service of Ms Cooper dated 13 September 2024;
(3)Affidavit of Kaye Griffiths dated 17 December 2024; and
(4)Outline of submissions filed on 19 December 2024.
Mr Rowley on behalf of the supporting creditor addressed the court on the question of Mr Trim’s solvency. In doing so he relied on the affidavit of Ms Lori Trudy Ann Kambitsis, filed on 18 December 2024.
I have read and had regard to the material on which the parties rely. However, before exploring the parties’ competing contentions, it may be useful to set out the legal principles which will frame my determination of the issues in dispute.
RELEVANT PRINCIPLES
Petitioning creditor must prove the bankruptcy
A hearing under s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act) seeking review of a decision of a registrar is a hearing de novo and the relevant matter is considered afresh. The review does not hinge, or focus, upon error in the decision of the registrar. In a bankruptcy matter, the reviewing judge must be satisfied that the requirements of s 52(1) of the FCFCOA Act have been proven and must exercise afresh the discretions conferred by s 52(2).
Because the hearing under s 256(1) is conducted de novo, the Bankruptcy Rules apply as if the application was being heard for the first time by the court,[3] unless the court waives or dispenses with compliance.
[3] Totev v Sfar (2008) 167 FCR 193 at [12]-[15] per Emmett J.
Part 4 of the Bankruptcy Rules relate to a creditors petition seeking a sequestration order and it sets out the various evidentiary requirements necessary to support the application. Relevantly, rule 4.06 states inter alia that no earlier than the day before the hearing of the petition an applicant creditor must file an affidavit confirming that a search has been made of the National Personal Insolvency Index (affidavit of search) and an affidavit which states the amount of the debt owing (affidavit of debt). The requirements of rule 4.06 must be complied with before the hearing of the creditors petition[4].
[4] Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), rule 4.06(1).
Bankruptcy notice must be valid
Before making a sequestration order, the court must be satisfied that the matters set out in the creditor’s petition are proven, including that the act of bankruptcy has been established. When the act of bankruptcy relied upon is non-compliance with a bankruptcy notice, the court must be satisfied that the notice itself was valid.[5] An invalid notice cannot sustain an act of bankruptcy.
[5] Adams v Lambert (2006) 228 CLR 409 (Adams); Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 (Kleinwort).
A bankruptcy notice speaks at the date of its issue.[6] A bankruptcy notice must spell out clearly what the named debtor must do to avoid committing an act of bankruptcy. The amount claimed must not only be stated but verified by a copy of the judgment and (if costs are claimed) a certificate of taxation and (if interest is claimed) details of the calculations and the relevant provision(s) under which the claim is made. All this is directed to ensuring that the debtor is given a precise, verified, dollar figure which must be paid or compromised within the stated time if an act of bankruptcy is to be avoided.[7]
[6] Walsh v Deputy Commissioner of Taxation (1984) 156 CLR 337 at 339 (Walsh); Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 at 587 (Emerson).
[7] St George Wholesale Finance Pty Ltd v Spalla [2000] FCA 1094 at [34].
Where interest is claimed on the notice, the debtor should be able check the claim by reference to the relevant statutory provision.[8] Reference to an incorrect provision will not necessarily invalidate the notice, but the inclusion of interest calculated at the wrong rate or on the wrong basis may do so.[9]
[8] Adams at 414.
[9] GR Finance Ltd v Waldron [2009] FMCA 418 at [48]-[49] (Waldron).
A bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice. In such cases the notice is a nullity whether or not the debtor is in fact mislead or otherwise suffers prejudice by it.[10]
[10] Kleinwort at 80 per Mason CJ, Wilson, Brennan and Gaudron JJ.
A bankruptcy notice which misstates the amount due to the creditor is defective or irregular. Prima facie, a bankruptcy notice will be invalid if it claims an amount greater than that for which the creditor is entitled to issue execution as at the date of issue of the notice.[11]
[11] Walsh at 339–340 per Gibbs CJ (with whom other members of the Court agreed).
However, section 41(5) of the Act relevantly provides that:
(5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time fixed for compliance with the notice, gives notice to the creditor that he or she disputes the validity of the notice on the ground of misstatement.
While s 41(5) of the Act requires that the debtor “gives notice to the creditor”, there is no particular prescribed form of notice. However, in order to challenge the validity of a bankruptcy notice by reason of an overstatement of the amount due, a s 41(5) notice must give notice to the creditor that the debtor disputes the validity of the notice and, secondly, gives notice that the debtor does so on the ground of “misstatement”.[12] This does not mean that the debtor must identify the misstatement with complete precision, or specify the exact amount of the alleged excess of the claim. Rather, on a fair reading of the notice of objection, it must be sufficient to alert the creditor to the nature of the misstatement.[13]
[12] Seovic Civil Engineering Pty Ltd v Groeneveld (1999) 87 FCR 120 at [32]-[33] (Seovic).
[13] Seovic at [38]-[39].
Whether there is in fact a misstatement of the debt demanded in the bankruptcy notice is a question of fact to be determined by the Court. The onus is on the debtor to demonstrate that the amount claimed is misstated.
The date on which the inquiry as to whether or not the amount specified in the notice is excessive is to be made as at the date of the issue of the notice.[14]
[14] Emerson at 587.
A misstated bankruptcy notice is a nullity and of no effect and, if proper notice of an overstatement under s 41(5) of the Act has been given, the overstatement cannot be amended under s 33(1)(b) or cured by s 306(1) of the Act.[15]
[15] Skouloudis v St George Bank Ltd (2008) 173 FCR 236 per Edmonds J.
Section 41(5) is engaged where a bankruptcy notice is defective only because it is overstated, but not otherwise. If there is a defect of any other type in the bankruptcy notice, or some other failure to comply with the Act or Bankruptcy Rules relating to its preparation, the error may or may not be fatal.
Where the notice is defective for a reason which amounts to a failure to meet the requirements made essential by the Act or where it could reasonably mislead the debtor as to what is necessary to comply with the notice,[16] s 41(5) is not engaged even if the effect of the deficiency is an overstatement of the amount owed.
[16] Kleinwort at 79.
Solvency
Section 52(2) of the Act confers a discretion on the court not to make a sequestration order if it is satisfied that the debtor is able to pay their debts. In considering the exercise of discretion on the grounds of solvency, the court should concern itself only with the debts that are currently payable or those which will become payable in the reasonably immediate future.[17] In terms of considering the capacity of the debtor to meet his debts, his resources are not limited to immediately available cash. It is open to the court to consider money which can be procured by realisation by sale or mortgage or pledge of his assets within a relatively short period – however this will always be considered in the context of the size of the debt and the debtor’s circumstances.[18]
[17] International Alpaca Management Ltd v Ensor [1999] FCA 72 at [8]-[10].
[18] Sandell v Porter (1966) 115 CLR 666 at 670.
I now turn to the issues raised by Mr Trim.
IS THE APPLICATION FOR SEQUESTRATION INVALID FOR FAILURE TO COMPLY WITH THE BANKRUPTCY RULES?
It is common ground that at the time of this hearing the petitioning creditor had not filed an affidavit of search and an affidavit of debt as required by r 4.06 of the Bankruptcy Rules.
Mr Baillie submitted that the filing of those affidavits is a mandatory requirement for the making of an order under s 52 of the Act and the failure to comply with his mandatory requirement is fatal to the application. Mr Baillie submitted that in the absence of an order waiving compliance, the petitioner’s failure to file of an affidavit of search and an affidavit of debt are a complete answer the creditor’s petition and doom it to failure.
In light of Mr Baillie’s submissions, the petitioning creditor made application for the Court to dispense with compliance with the rule. Ms Griffiths submitted that the court could rely on the affidavit of debt and the affidavit of search which were filed with the Court prior to the hearing conducted by Registrar in October 2024. Ms Griffith submitted that there had been no material change since the date of those affidavits, but offered no other reasons for the failure to comply.
After hearing submissions on this compliance issue from both parties’ counsel, I decided not to rule on it immediately but would proceed to hear submissions in relation to the other substantive issues. I note that following the hearing on 20 December 2024, two affidavits were filed by the petitioning creditor: an affidavit of search affirmed and filed by Ms Griffiths on 20 December 2024 and an affidavit of debt sworn by Mr Yeo on 20 December 2024 but filed on 4 February 2025.
CONSIDERATION
I am not prepared to waive or dispense with compliance with the rule.
The legislative scheme requires the filing of these affidavits as the means of satisfying the court about matters about which the court must be satisfied pursuant to s 52 of the Act. Although the Court has power to waive compliance with the rules of court, it will not exercise that discretion unless the interests of justice demand. The mandatory language of r 4.06 (i.e. “must”) is a powerful signal that parliament intended compliance with the rule as an essential requirement of the bankruptcy scheme.
In Totev v Sfar [2008] FCAFC 35, the Emmett J explained at [14]-[15]:
[14] Because the hearing of an application for review of a sequestration order is a hearing de novo, it would not be sufficient for the reviewing judge to be satisfied that the registrar made no error and simply to dismiss the application for review. The judge who hears the review application must hear the petition afresh and must be satisfied as to the matters referred to in s 52 of the Bankruptcy Act. Thus, the reviewing judge must herself or himself be satisfied with the proof of:
(a) the matters stated in the petition;
(b) the service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing.
The reviewing judge must also exercise afresh the discretions conferred by s 52(2).
[15] In particular, unless the Bankruptcy Rules are waived, the judge must have the affidavits referred to in r 4.06 of the Bankruptcy Rules, which must be sworn shortly before the hearing. Except in the case of a review on the same day as the sequestration order was made, the affidavits relied upon before the registrar would not satisfy r 4.06. In the absence of fresh affidavits, it would be necessary that compliance with the Bankruptcy Rules be waived.
It should have been apparent to the petitioning creditor from the outline of submissions filed by Mr Baillie on 28 November 2024, that the amount of the debt is contested.
The affidavits of search and debt filed on 2 and 3 October 2024 respectively are stale and are unsatisfactory for the purposes of a de novo hearing.[19] With no disrespect to Ms Griffiths, the court cannot simply rely upon her assertion that there has been no material change in the 10 or 11-week period between the registrar hearing and the review. Assertions from the bar table that a debt remains outstanding or that a search does not reveal any other debt agreements are insufficient. Sworn evidence deposing to those matters is required. The evidence must be current and should be before the court before the hearing commences.
[19] Martin and Another v Commonwealth Bank of Australia (2001) 217 ALR 634
In any event, for reasons which will become apparent, the affidavit of debt relied upon is little more than a bare assertion and is attended with such ambiguity that it does not provide me satisfaction as to the amount truly owed by the debtor. Even if I was to dispense with compliance with r 4.06, the evidence of the petitioning creditor fails to measure up as satisfactory proof of the debt which remains outstanding.
Ms Griffiths submitted that if I were not inclined to dispense with the requirement for compliance with r 4.06, I should grant her leave upon an undertaking for those affidavits to be filed promptly after the hearing.
Having heard the submissions on behalf of the applicant debtor, I have decided that there would be no utility in granting leave and I decline to do so. As will be seen later in these reasons, I am persuaded that the sequestration order should not be made because of other serious defects in the Bankruptcy Notice and my conclusion that there has been no act of bankruptcy upon which such an order could be made.
Is the Bankruptcy Notice Valid?
The petitioning creditor submitted that all formal requirements for the making of a sequestration order have been met. The petitioning creditor submits that the Bankruptcy Notice was validly served on Mr Trim and that the notice itself is free of any material errors or omissions. It is submitted that the Bankruptcy Notice meets the requirements made essential by the Act and that it should be accepted as valid.
In relation to service of the Bankruptcy Notice and the creditor’s petition, Ms Griffiths relied upon two affidavits of Charlotte Alexandra Cooper affirmed on 13 September 2024. Each of those affidavits deposed to email service pursuant to the orders for substituted service made by a registrar of the court in July 2024.
As to the outstanding Judgment Debt, the petitioning creditor acknowledges receipt of the first instalment of $38,000 paid by Mr Trim pursuant to the Forbearance Deed and submits that the Bankruptcy Notice properly accounts for the payment received in reduction of the Judgment Debt.
It is submitted that the $38,000 payment was properly applied, in the first instance, to the petitioning creditor’s entitlement to indemnity costs arising prior to the making of the Forbearance Deed. The petitioning creditor submits that its right to apply the payment in that manner arises from clause 7.2.2 of the Forbearance Deed which states:
7.2 The Debtor acknowledges and agrees that:
7.2.1 ….
7.2.2the Trustees reserve the right to apply any instalment payments received on any account outstanding, including in satisfaction of any outstanding legal costs and interest in priority to reduction of the Debt.
Save for the $38,000, the petitioning creditor denies any further payments by Mr Trim and says that there is no evidence before the court to support his assertion that he has paid the debt the subject of the Bankruptcy Notice.
In relation to the claim for interest, the petitioning creditor submits that the interest has been correctly calculated and properly particularised. The creditor contends that at the time of entry of the default judgment, the entitlement to post-judgment interest arose pursuant to section 77 of the Federal Circuit Court of Australia Act 1999 (Cth) and rule 26.01 of the Federal Circuit Court Rules 2001 (Cth). That rule incorporated the rate of interest prescribed by the Federal Court Rules 2011 (Cth). It is submitted that the claim of $4,790.35 is a proper calculation of the interest accrued from the date of the judgment up to the date the parties entered into the Forbearance Deed.
The balance of the interest claim, namely $24,677.41, is said to comprise interest calculated from 12 February 2020 up to 9 August 2023 but pursuant to section 2 of the Penalty Interest Rates Act 1986 (Vic).
As mentioned, the petitioning creditor accepts that Mr Trim paid the first $38,000 instalment under the Forbearance Deed on 11 February 2020. The petitioning creditor claims that Mr Trim was then in default of the Forbearance Deed from the day after that first payment and that interest accrued from that date at the agreed rate prescribed by clause 7.2.1 of the Forbearance Deed which states:
7.2 the Debtor acknowledges and agrees that:
7.2.1in the event of Default, interest will continue to accrue on the Trustee’s Claim at the rate fixed by section 2 of the Penalty Interest Rates Act 1986 (Vic).
Ms Griffiths submits that any allegation by Mr Trim that the Bankruptcy Notice was defective, misleading or confusing should be rejected.
Did the Bankruptcy Notice identify the wrong legislation in relation to calculation of interest on the Judgment Debt?
The Schedule of Post-Judgment Interest which is annexed to the Bankruptcy Notice sets out the manner in which interest has been calculated “in relation to the judgment/s or order/s accompanying this notice”.
The judgment or order number in respect of which the calculations had been prepared is ADG/2017, namely the order of Judge Heffernan made on 18 April 2019. Order 2 of his Honour’s states:
2. The Court gives judgement in the favour of the Applicant in the sum of SEVENTY EIGHT THOUSAND DOLLARS ($78,000) plus interest and costs from the last default pursuant to the terms of settlement agreement entered into on 19 October 2018.
The Schedule of Post-Judgment Interest in the Bankruptcy Notice is broken into 2 rows.
The first row calculates interest on a principal amount of $78,000 at an interest rate of 7.5% for the period 19 April 2019 to 11 February 2020 pursuant to section 52(2) Federal Court Act 1976 (Cth) and r 39.06 of the Federal Court Rules 2011 (Cth). That row calculates an interest claim of $4,790.35.
The second row calculates interest on a principal sum of $70,694.22 at an interest rate of 10% for the period 12 February 2020 until 9 August 2023 pursuant to s 2 of the Penalty Interest Rates Act 1986. The amount of interest claimed pursuant to this calculation, based on the interest rate in cl 7.2.1 of the Forbearance Deed, is $24,677.41.
The total amount of interest claimed under the schedule is $29,467.76 and that amount has then been recorded at item 3 as part of the claims said to be owed to the creditor on page 1 of the Bankruptcy Notice.
Claim for interest based on the Deed of Forbearance
Counsel for Mr Trim submitted that interest claimed is not properly allowable as interest accrued against or in respect of the debt upon which the Bankruptcy Notice was based ie the Judgment Debt.
Mr Trim submits that upon default of the Forbearance Deed the creditor was faced with a choice. It was open to the creditor to sue on the Forbearance Deed and enforce their rights to the prescribed instalments and the penalty interest payable thereon. Alternatively, the creditor could revert to its preserved rights to enforce the Judgment Debt. But the creditor could not do both, nor merge the two.
The applicants submit, and I agree, that by choosing to issue a bankruptcy notice based on the applicant’s failure to meet the Judgment Debt, the creditor was limited to seeking interest prescribed by the relevant court order. That extended only to seeking interest calculated in accordance with the Federal Circuit Court Rules 2011 (Cth), not interest arising from a collateral agreement.
Further, even if interest could be claimed in relation to the Forbearance Deed, I agree with the Mr Trim’s counsel that it was wrongly calculated. The creditor contends that penalty interest accrued and was payable from the date of the first instalment. However, in my view there was no default under the Forbearance Deed until Mr Trim failed to meet the second instalment. It was only then that an event of default occurred which could trigger interest to accrue at the penalty interest rate.
I agree with Mr Trim that where a judgment debt is used for the basis of bankruptcy notice and interest is clamed in relation to that judgment debt, one cannot claim interest which arises from a collateral document. The Judgment Debt is confined in its sum, and any claim for interest must be in accordance with that prescribed by the court instrument and applicable legislation.
This issue was the subject of discussion in GR Finance Ltd v Waldron [2009] FMCA 418 (GR Finance) where Federal Magistrate Barnes considered whether a bankruptcy notice was defective on that ground.
In GR Finance the bankruptcy notice set out a calculation of interest based on a mortgage/loan contract rather than the statutory rate which attached to a judgment debt. The court held that the amount specified in the bankruptcy notice was not in fact due because the amount claimed was overstated, interest having been calculated by reference to the collateral agreement rather than on the judgment. The court accepted the debtor’s contention that the bankruptcy notice did not comply with an essential requirement of the Act because the document containing details of the calculation of the amount of interest misstated the provision under which interest was claimed, the principal sum and the interest rate as well as the amount.
Further, the Court in GR Finance accepted that the defect in the bankruptcy notice was not a mere “mistaken citation of the source of entitlement to claim interest”[20] or a careless omission or a clerical error capable of being cured under s 306 of the Act. Rather, Barnes FM concluded that the incorrect basis for the claim of interest constituted a “substantive defect or irregularity such as to exclude the operation of s 306 of the Act”.[21] The court found that the significance and importance of the defect was compounded where the total amount claimed under the notice was, as it is here, a combined amount arising under different instruments with different interest regimes.[22]
[20]The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 (Lewis) cited in Adams.
[21] Citing Lee J in Lewis at [68].
[22] see GR Finance Ltd v Waldron [2009] FMCA 418 at [52].
The creditor may still have separate enforceable rights pursuant to the Forebearance Deed which stand apart from rights arising in relation to the Judgment Debt. However, it was not open to the petitioning creditors to conflate those rights as they appear to have done.
In my view that Bankruptcy Notice is defective as alleged by Mr Trim.
Did the Bankruptcy Notice fail to properly account for payments made subsequent to the judgment?
Mr Trim submits that a bankruptcy notice which incorrectly sets out payments with respect to a judgment debt and which fails to accurately record payments or credit received will be invalid.[23] He submits that a bankruptcy notice needs to identify all payments made since the judgment. Here, while it is clear that Mr Trim made a payment of $38,000, he says that amount was not properly accounted for in the Bankruptcy Notice, leaving him in a state of uncertainty about the true quantum of his indebtedness and the source of his liability.
[23] St George Wholesale Finance Pty Ltd v Spalla (2000) 181 CLR 68.
Ms Griffiths submits that as a party to the Forbearance Deed, Mr Trim should be taken to have understood the operation of that document, including the right of the creditor to apply any payment made pursuant to that agreement to any outstanding costs. She submitted that his understanding of the Forbearance Deed and the relevant background was sufficient for him to work out how the Bankruptcy Notice had been calculated, including how and why the creditor applied the sum of $7,305.78 in item 5. She submitted that that should have set about a train of enquiry from which the answer would have been readily apparent.
I agree with the submissions of the debtor’s counsel that the accounting for the $38,000 payment made by Mr Trim fails to meet the fundamental requirements of the Act. The manner of calculation adopted by the creditor involved an impermissible conflation between the Judgment Debt and the Forbearance Deed. In arriving at the amount of $7,305.78 the creditor allowed for the $38,000 payment but deducted from it an amount which was owed under a collateral agreement.
Is the Bankruptcy Notice misleading?
There is a further consequence of these defects. In my view, the failure to properly identify the source of and calculate the interest claim and the failure to properly account for the $38,000 constitutes a misdescription of what is required by the debtor to meet the asserted debt. The purpose of the Act is that that the form of bankruptcy notice based on a judgment debt should, whether in the attached document or elsewhere, make the fact that interest is claimed on the judgment that forms the basis for the notice clear as a matter of substance.
Accordingly, even if I am wrong about the calculation of interest being an essential requirement, I am satisfied that the Bankruptcy Notice in this case could reasonably mislead a debtor as to what was necessary to comply with the notice.
As the court found in GR Finance there will be circumstances where a combination of mistakes is of such a nature and importance that the errors will invalidate the notice. That is so, even allowing for the fact that the bankruptcy notice must be read as a whole and can be read in light of facts extraneous to the notice itself and that it should be read sensibly and not perversely.[24]
[24] See Weinberg J in Northam v Commonwealth Bank of Australia [1999] FCA 544 at [22].
The issue is not whether the debtor in question has in fact been misled.[25] In this case I find, as the court did in GR Finance at [56]:
In this case the mistakes were capable of misleading the debtor by producing uncertainty as to the source or sources of the debtor’s liability to the creditor under the bankruptcy notice and the amount in fact due to the creditor (in particular whether that was based on a judgment alone or purported to assert a liability based both on the judgment and the mortgage and/or loan contract between the creditor and the debtor). Hence it was capable of misleading the debtor as to what was necessary to comply with the notice (see Kleinwort Benson at [16]) and Stec v Orfanos [1999] FCA 457). Such a defect is not merely formal and cannot be cured under s.306(1). The bankruptcy notice is invalid. (emphasis added)
Is Mr Trim solvent and able to pay his debts?
[25] Re a Judgment Debtor [1908] 2 KB 474 at 481; and Kleinwort at 80.
Mr Trim’s submissions
Section 52(2) of the Act provides that the Court has a discretion not to make a sequestration order if it is satisfied the debtor can pay their debts. Under the third and final ground of review, Mr Trim contends that even if the Bankruptcy Notice is upheld as valid, he is nonetheless solvent and has the capacity to pay off any debts against his name.
Relying on his second affidavit and the affidavit of Rebecca Jane Rayner (affirmed on 28 November 2024) Mr Trim asserts the following assets and sources of income:
(a)a property estimated to be worth approximately $850,000 situated at 30 Strangways Avenue, Hayborough;
(b)personal property valued at approximately $150,000;
(c)cash at bank totalling $27,044.69;
(d)entitlements to commission payments from his trading as Commercial & Developmental Property Group, totalling $365,167; and
(e)entitlements to commission from his participation in the Hotel Property Group, with a present sum of $801,5000 and an anticipated future sum of $2,000,000.
Mr Trim submitted that cash alone is not indicative of a debtor’s ability to pay off its debts, and that the Court’s assessment should encompass other resources, such as money which he can procure via a sale, mortgage or pledge of assets. While Mr Trim acknowledged that he had liabilities of just over $700,000, he claimed his assets outweighed any liabilities owed. He says that all of his assets are realisable within a reasonable time and that his commissions are anticipated to be paid by March 2025.
Mr Trim acknowledged he is currently involved in proceedings in the District Court of South Australia. He argued that the claim against him in those proceedings, a total sum of $1,258,890.76, is unlikely to be successful. In any event, he submitted that any further liabilities he may incur are irrelevant to the Court’s consideration of his present capacity to pay his debts.[26]
[26] BWK Elders (Australia) Pty Ltd v White (2004) 3 ABC (NS) 70 at [6]
Section 52(2) of the Act also provides that a Court may dismiss a Creditor’s petition if it satisfied “that for other sufficient cause a sequestration order ought not to be made”. Seeking that the court exercise its discretion in his favour, Mr Trim argued that if a sequestration order is made and he becomes a bankrupt, he will lose his real estate license and any ability to earn an income.
Petitioning Creditor’s submissions
The petitioning creditor submits that Mr Trim has failed to make out his claim of solvency. In that respect, Ms Griffiths relies upon the following:
(1)investigations undertaken by the Trustee of Mr Trim’s bankrupt estate conclude that he is insolvent and that there is an estimated deficiency of assets to liabilities of $1,413,808.55;
(2)that the position deposed by Mr Trim in relation to his residential property as his alleged main asset is misleading;
(3)that claims made by Mr Trim regarding his future income are highly speculative and at best contingent. The petitioning creditor says that commissions which Mr Trim claims are owed to him are conditional upon sales completing and in any event much of the income will be directed to companies with which he is associated, rather than to him; and
(4)the petitioning creditor also relies upon the claims made by the supporting creditor LTAK Investments, as discussed below.
Submissions by supporting creditor
The supporting creditor, LTAK Investments, sought to address the question of Mr Trim’s solvency and relied upon the affidavit of Lori Trudy Anne Kambatsis sworn on 18 December 2024. Ms Kambatsis deposes that she is the sole director and secretary of LTAK Investments, an unsecured creditor in Mr Trim’s bankrupt estate.
Ms Kambatsis deposes that she has advanced 4 loans to Mr Trim and other persons and entities with which Mr Trim is associated, namely:
(1)a loan of $30,000 to Mr Trim to fund the acquisition of his residential property at 30 Strangeways Avenue, Hayborough in South Australia (Loan 1);
(2)a loan of $256,400 to an entity related to Mr Trim wherein the Strangeways property was said to be collateral security for the repayment of the loan (Loan 2);
(3)a loan of $105,000 to Mr Trim and others as a co-borrower (Loan 3); and
(4)a loan of $48,000 to Mr Trim and others as a co-borrower (Loan 4).
In her affidavit Ms Kambatsis alleges that no amounts have been repaid under the loans for months if not years. She alleges that net of the amounts which have been paid, the following amounts remain outstanding as at the end of October 2024:
(1)Loan 1: $67,238.89
(2)Loan 2: $659,636.04
(3)Loan 3: $416,674.58
(4)Loan 4: $115,341.25
On 5 September 2023, LTAK commenced proceedings in the District Court of South Australia seeking to enforce caveatable interests under the loans. On 9 October 2024, LTAK Investments filed a statement of claim in the District Court proceedings seeking relief under the loans, including as against Mr Trim. In respect of those proceedings, Ms Kambatsis filed two affidavits, each of which she annexed to her affidavit in these proceedings.
The supporting creditor submitted that Mr Trim has not filed a defence in the District Court proceedings, nor has he attended a hearing or in any other way participated in those proceedings. Moreover, the supporting creditor submits that no party has sought to stay the District Court proceedings so far as they concern Mr Trim and, as things currently stand, LTAK Investments intends to make an application to enter default judgment against Mr Trim.
Against that background, Mr Rowley on behalf of the supporting creditor submitted that the court should reject any assertion by Mr Trim that he is solvent and able to meet his debts. Mr Rowley submitted that Mr Trim is a guarantor of, and is jointly and severally liable for all of the loans which have been advanced by LTAK. The supporting creditor submits that Mr Trim has not given any explanation as to how he could defend the District Court proceedings and that he has not disclosed those proceedings or his indebtedness to LTAK in any of the materials filed in opposition to the sequestration order.
Mr Rowley submitted that a number of other factors weigh heavily against a finding that Mr Trim is solvent, including:
(1)Mr Trim has given no explanation as to why the District Court proceedings were not revealed in his first affidavit;
(2)Mr Trim has failed to acknowledge that the loans are secured against his residential property; and
(3)Mr Trim has deposed that he has only $16,000 to his credit in his bank account.
Mr Rowley submitted that there is clear evidence that each of the loans has been advanced and that Mr Trim has referred to and acknowledge his indebtedness in correspondence with Ms Kambatsis. Furthermore, Mr Rowley noted that by the time of filing his most recent affidavit, Mr Trim was squarely on notice of the evidence on which the supporting creditor would rely in these proceedings, yet Mr Trim has not denied the debt or made any attempt to explain any basis of a defence.
The supporting creditor also submits that the court should be sceptical about Mr Trim’s claims of future income. Tax invoices which have been issued for payment of commissions in relation to real estate deals appear to have been issued by a corporate entity associated with Mr Trim (rather than Mr Trim himself) the invoices bear no due date for payment and do not include any terms of trade. Although Mr Trim asked the court to accept that those commissions are owed and immediately due for payment, the supporting creditor notes that the commissions are contingent on property settlements being completed and that there is no evidence which would satisfy the court as to when these contingencies will be met. On the whole, the supporting creditor says that the evidence advanced by Mr Trim as to his solvency is extremely unsatisfactory and should be treated with great caution.
Conclusion on solvency
I do not accept Mr Trim’s claim that he is solvent.
The evidence suggests that he is indebted to LTAK. I am satisfied on the available evidence that the sums of money have been advanced to him and that they give rise to a caveatable interest in his home. I accept that the District Court statement of claim does not itself constitute a debt, but I am not persuaded by the evidence that Mr Trim has any obvious defence.
I accept that the District Court proceedings may have been stayed against him and that there is no present requirement for him to file a defence. However, it was submitted on behalf of the supporting creditor that by the time of filing his affidavit on 20 December 2024, Mr Trim had available to him all of the materials on which the supporting creditor intended to rely. Notwithstanding, Mr Trim has not denied the allegations that he is directly involved in a number of loans and has not denied indebtedness to LTAK. Despite having the opportunity to do so, he has not sought to outline the nature of his defence.
DISPOSITION
For the reasons set out in this judgment I have decided that the Bankruptcy Notice was invalid and that there has been no relevant act of bankruptcy.
It follows that the creditor’s petition must be dismissed and any sequestration order set aside.
I will hear the parties, including the interested party, Mr Quin, on the question of costs. I invite any party seeking costs in relation to this proceeding to file and serve on all other parties, within 14 days of this judgment, a written submission (not exceeding 5 pages) in support of their application. Such submission may include a schedule of costs claimed and should address the court on the basis the court should adopt in ordering costs (if any).
A party against whom costs are sought may file and serve on all other parties a reply (not exceeding 3 pages) within 28 days of this judgment.
Upon receipt of any applications for costs and any submissions in reply, I will determine the applications on the papers unless I consider a further oral hearing is required.
I certify that the preceding one hundred and fourteen (114) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Forbes. Associate:
Dated: 15 August 2025
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