Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Appeals from sequestration orders made by registrars – continued

An appeal from a sequestration order made by a registrar in 2016 is being heard, in 2021.

In bankruptcy litigation between a Ms Bechara and a Mr Bates various courts have been found to have made errors in the process of dealing with a purported ‘appeal’ by Bechara from a sequestration order made against her estate by a registrar of the Federal Circuit Court in 2016. Bates was the petitioning creditor. This is explained in Important rules in reviewing registrars’ sequestration orders which itself explains the decision of Chief Justice Allsop of 14 May 2020.

As the Chief Justice explained, a sequestration order involves the exercise of the judicial power of the Commonwealth under the Constitution, which power cannot be exercised otherwise than by a judge. In practice, registrars are delegated to exercise that power but only if there is a right of review – de novo – by a judge on questions of both fact and law.  Any challenge to the registrar’s decision requires a complete rehearing of the facts and the law; it is not an ‘appeal’, which might be confined to consideration of whether the registrar made a relevant error. In a rehearing, the evidence must be presented afresh and the judge must be satisfied as to all the matters in s 52 of the Bankruptcy Act. While there was a purported appeal from the registrar’s order, there has never been a de novo hearing of Bates’ creditors petition.

In May 2020, these issues having been explained, the matter was left open by the Chief Justice for further case management.  The 2021 outcome, to this point at least, is now further and fully explained in a decision of the Full Federal Court: Bechara v Bates [2021] FCAFC 34.

The Full Court described the process as a “miscarriage of the proceeding in the Circuit Court”, noting that the matter had also been to the Federal Court and the High Court.  While some part of the four-year delay was caused by Bechara not advancing her case, she had since at least 2018 been requesting, properly, a hearing de novo of the creditor’s petition.  During that time, with a sequestration order having been made, she had not filed her statement of affairs, but that was for the Official Trustee to take up and though informed of these proceedings, it did not appear. Hence, there was no evidence of her solvency or otherwise, even if that were relevant.

Given these factors and given the “seriousness of the change of status to that of a bankrupt”, the Full Court set aside previous orders made in 2016 and 2017 and remitted the matter to the Federal Circuit Court for prompt rehearing of the creditor’s petition.  The question of costs was reserved pending that outcome.

 

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