Legal
A tale of two creditor’s petitions: Can the Court make a post-bankruptcy costs order apply retrospectively? By Ellen Ferris and Stephen Mullette*
Ellen Ferris
“A day wasted on others is not wasted on one’s self” – or is it? In one of the first decisions this year, the Federal Circuit Court of Australia reconsidered the position regarding costs orders made after the date of bankruptcy. In ACN 116 746 859 Pty Ltd (formerly Palermo Seafoods Pty Ltd ACN 116 746 859) v Menniti [2020] FCCA 24 Judge Jarrett had to decide whether a Court has the power to effectively order a trustee to accept, as a debt in the bankruptcy, a costs order against the bankrupt made after a sequestration order.
The Facts
Stephen Mullette
In an interesting turn of events, this matter involves two creditor’s petitions on foot at the same time. This should not occur as petitioning creditors are required to search for existing petitions, prior to filing their own. Nevertheless, in unusual circumstances it does sometimes happen. Here, the first creditor’s petition against the debtor, by Mr Murphy (“the Murphy petition”) was unable to proceed because the
judgment debt on which the Murphy petition was based had become the subject of an appeal. ACN 116 746 859 Pty Ltd (“Palermo”) filed an appearance (and an affidavit of debt) as a supporting creditor and applied to be substituted as the petitioning creditor in the Murphy petition. However, a substituted creditor proceeds on the basis of the existing petition, and so the Court refused Palermo’s application for the same reason that Mr Murphy was unable to proceed i.e. that the Murphy judgment debt was subject to an appeal. Palermo had at an earlier stage issued its own bankruptcy notice to the debtor. An application to set aside the Palermo bankruptcy notice was dismissed and Palermo then filed a separate creditor’s petition. Unbeknownst to Palermo at the time, the debtor had filed (but did not serve) an application to review the Registrar’s decision to dismiss the application to set aside the Palermo bankruptcy notice. Before the second (Palermo’s) creditor’s petition was heard, the appeal of the first petitioning ➤
May 2020 • CREDIT MANAGEMENT IN AUSTRALIA
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