[2025] FCA 976
General information, not legal advice.
Federal Court of Australia
2025-08-19
Wheatley J
Original judgment source is linked above.
Ayinde v The London Borough of Haringey [2025] EWHC 1383
Bayne v Baillieu (1907) 5 CLR 64; [1907] HCA 39
Boles v Official Trustee (2001) 183 ALR 239;
De Robillard v Carver (2007) 159 FCR 38; [2007] FCAFC 73
Finance Facilities Pty Ltd v Federal Commissioner of Taxation (1971) 127 CLR 106; [1971] HCA 12
Francis v Eggleston Mitchell Lawyers Pty Ltd [2014] FCAFC 18
Geismayr v The Owners, Strata Plan KAS 1970 [2025] BCCRT 217
Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd [2017] WASC 152; (2017) 52 WAR 90
Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd [2018] WASCA 163; (2018) 53 WAR 325
Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315
JML Rose Pty Ltd ACN 620 307 217 v Jorgensen and Jorgensen atf The Leigh Jorgensen Family Trust [2025], Magistrate Hay, 30 May 2025
JML Rose Pty Ltd v Jorgensen (No 2) [2025] FCA 282
JML Rose Pty Ltd v Jorgensen [2024] FCA 1421
Kaur v Royal Melbourne Institute of Technology [2024] VSCA 264
Ko v Li [2025] ONSC 2766
Lamb v Sherman (2023) 298 FCR 79; [2023] FCAFC 85
Lambshed v Lambshed (1963) 109 CLR 440; [1963] HCA 60
Luck v Secretary, Services Australia [2025] FCAFC 26
May v Costaras [2025] NSWCA 178
Nikolic v Nationwide News Pty Ltd (T/as The Australian) [2025] VSCA 112
Nilant v Macchia (2000) 104 FCR 238; [2000] FCA 1528
Official Receiver v Schultz (1990) 170 CLR 306; [1990] HCA 45
Official Trustee in Bankruptcy v Mateo (2003) 127 FCR 217; [2003] FCAFC 26
Re Deiru (1970) 16 FLR 420
Re Ditford; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347
Re Macks; Ex parte Saint (2000) 204 CLR 158; [2000] HCA 62
Re Raymond; Ex parte Raymond (1992) 36 FCR 424; [1992] FCA 495
Re Scott (1975) 6 ALR 558
Re Wakim; Ex parte McNally (1999) 198 CLR 511; [1999] HCA 27
Rigg v Baker (2006) 155 FCR 531; [2006] FCAFC 179
Wren v Mahoney (1972) 126 CLR 212; [1972] HCA 5
Yang v L & H Group (a limited partnership) (2015) 13 ABC(NS) 269; [2015] FCA 932
Zaghloul v Jewellery & Gift Buying Service Pty Ltd t/as Nationwide Jewellers [2020] FCA 1045
LEON LEE, AS TRUSTEE OF THE BANKRUPT ESTATE OF LEIGH ALAN JORGENSEN (THE BANKRUPT)
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
(a) The default judgment on which the bankruptcy was based has since been set aside by the Magistrates Court of Queensland, which removes the legal foundation for the sequestration order.
(b) The alleged debt arose in connection with legal work said to involve the LJ Family Trust, where [Mr Jorgensen] was acting solely as trustee. The creditor mischaracterised the claim as personal, despite no enforceable personal liability being established.
(c) No valid or enforceable cost agreement was in place, and the document relied upon was unsigned, non-compliant, and contained an incorrect or disputed client name.
(d) [Mr Jorgensen] was denied procedural fairness by not receiving notice of the default judgment and due to court registry delays that postponed the formal processing of [Mr Jorgensen's] timely application to set aside the judgment. Under law, the Court should have considered this notice regardless of processing delays.
(e) The bankruptcy notice was defective, including because it used an incorrect debtor name inconsistent with the default judgment, and misrepresented the debt as personal when it was not.
(f) The sequestration order was made in the absence of [Mr Jorgensen], even though both the creditor and the Registrar were aware of the dispute and the pending application to set aside the judgment. This contravenes natural justice.
(g) The bankruptcy process caused unjustified and disproportionate harm, including psychological and financial stress, reputational damage, and the unlawful freezing of multiple trust accounts, despite them not being personal assets.
(h) The proceedings disrupted other unrelated legal matters that [Mr Jorgensen] was actively pursuing at the time, compounding the damage caused.
(i) [Mr Jorgensen] reserves all rights to pursue appropriate remedies elsewhere in relation to the broader harm caused.
(1) First, Mr Jorgensen has not established that there is no debt owing by him to JML upon which the bankruptcy proceedings could have relied on, even though the judgment has been set aside. Further and separately, there was and is evidence of a supporting creditor who was willing to be substituted on the creditor's petition on the date of the sequestration order. There remains a debt owing to that supporting creditor. Accordingly, I am not satisfied that the Court was not bound to make the sequestration order on 16 October 2024 or on 20 March 2025. That is, I am not satisfied that the sequestration order ought not to have been made, and hence Mr Jorgensen has not satisfied the first element of s 153B(1) of the Act.
(2) Second, and in any event, including even if I was satisfied that the sequestration ought not to have been made, I would not, in an exercise of discretion, annul the bankruptcy. Mr Jorgensen has not provided sufficient evidence of his solvency, either at the time of the sequestration, or now. In contrast, there is evidence of outstanding amounts that are due and owing. Mr Jorgensen also has not provided full and frank disclosure of his financial affairs, completed his statement of affairs and he has not made any proposal for the payment of the fees and disbursements of the Trustee. The lack of evidence of Mr Jorgensen's financial position and solvency is a sufficient reason not to exercise the discretion in favour of annulling the bankruptcy. When the discretion is also considered in the totality of the evidence (or lack of it), it is clear it does not weigh in favour of granting the annulment sought.
THE COURT ORDERS THAT:
The estate of LEIGH ALAN JORGENSEN be sequestrated under the Bankruptcy Act 1966.
The applicant creditor's costs, including reserved costs, if any, be fixed in the sum of $4,585 be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
The costs of the supporting creditor, BODY CORPORATE FOR CAIRNS CENTRAL PLAZA APARTMENTS COMMUNITY TITLES SCHEME 40022, be taxed in accordance with the Federal Court Rules and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the date of the act of bankruptcy is 30 AUGUST 2024.
The Court also notes that a consent to act as trustee signed by Leon LEE has been filed under section 156A of the Bankruptcy Act 1966.
(1) the legal fees sought in the Magistrates Court by JML were in relation to fees billed to Mr Jorgensen on a solicitor and own client basis in the sum of $84,419.73. Mr Jorgensen had paid a total of $30,950, leaving a total of $53,469.73 unpaid together with interest thereon. The total legal fees were calculated on the basis of the costs agreement instead of calculated on the appropriate Court scale: QMC Judgment at [51]-[52];
(2) Mr Jorgensen contended that he did not receive the relevant disclosure notices, with the costs agreement contrary to s 308 and s 310 of the Legal Profession Act 2007 (Qld) (LPA). The Magistrate observed that on the evidence which was currently before that Court, there was no documentary evidence to support the position that the appropriate disclosures notices were provided. This was found to support a prima facie defence under s 316 of the LPA: QMC Judgment at [54]-[57].
(1) If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.
(1) the Court's satisfaction that the sequestration order ought not to have been made; and
(2) the Court's exercise of a discretion to make an order annulling the bankruptcy.
Section 153B(1) and its predecessors have been considered in many decisions of this and other Courts. These authorities establish a number of relevant propositions. They are:
...
(2) An applicant who seeks an annulment of his or her bankruptcy "carries a heavy burden". It is incumbent on an applicant "to place before the Court all relevant material with respect to his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the actual circumstances of the applicant": Re Papps; Ex parte Tapp [1997] FCA 1031; (1997) 78 FCR 524 at 531.
(3) In determining whether or not a sequestration order "ought not to have been made" the Court is not confined to a consideration of whether the order should have been made on the facts known to the Court at the time at which it was made. The Court must take account of facts, known at the time at which the sequestration order was made and at which it determines an annulment application, even if those facts were not before the Court at the time at which the sequestration order was made: Boles v Official Trustee in Bankruptcy [2001] FCA 639; (2001) 183 ALR 239 at 243; Re Raymond; ex parte Raymond [1992] FCA 495; (1992) 36 FCR 424 at 426.
(4) A sequestration order "ought not to have been made" if, on the facts known at the time of the annulment application, the Court would have been bound not to make the sequestration order: Re Frank; ex parte Piliszky (1987) 16 FCR 396.
...
(6) If the Court is so satisfied, it is not precluded from annulling the bankruptcy because the bankrupt had not sought to have the default judgment set aside or failed to oppose the creditor's petition or failed to seek a review of the sequestration order: Re Raymond; ex parte Raymond [1992] FCA 495; (1992) 36 FCR 424 at 426.
(7) The power conferred on the Court by s 153B(1) is discretionary in nature. Even if persuaded that the sequestration order ought not to have been made, the Court can, in appropriate circumstances, decline to annul the bankruptcy: Boles v Official Trustee in Bankruptcy [2001] FCA 639; (2001) 183 ALR 239 at 243.
(8) Considerations which may have a bearing on the exercise of discretion include unexplained delay in the making of the application, whether or not the applicant is solvent, whether or not the applicant has made full disclosure of his or her financial affairs and a failure by the bankrupt to oppose the creditor's petition and attend the hearing at which the sequestration order was made: Re Williams (1968) 13 FLR 10 at 24-5; Boles at 247; Re Papps; ex parte Tapp [1997] FCA 1031; (1997) 78 FCR 524 at 531; Rigg v Baker [2006] FCAFC 179; (2006) 155 FCR 531 at 548 [79] (per French J); Cottrell v Wilcox [2002] FCA 1115 at [7]. Additional considerations are collected in D. A. Hassall, "Annulment of Bankruptcy and Review of Sequestration Orders" (1993) 67 ALJ 761 at 766.
[emphasis added]
(b) whether the applicant has made full disclosure of his financial affairs, a matter as to which the applicant carries a heavy burden (Bulic at [12]; and Re Papps; Ex parte Tapp [1997] FCA 1031; (1987) 78 FCR 524 at 531);
(c) unexplained delay in any application;
(d) a failure by the bankrupt to oppose the creditor's petition and attend the hearing at which the sequestration order was made;
(e) whether the applicant debtor has made any proposal for the payment of the fees and disbursements of his or her trustee in bankruptcy; and
(f) the basis for any finding that a sequestration order ought not to have been made.
(1) Ought the sequestration order not to have been made?
(a) the application to set aside the Default Judgment remained reserved and the Court was aware of this on the review hearing (2025 Judgment at [43]); and
(b) as it was a hearing de novo, the Court had to be satisfied as to whether to sequestrate the estate. The Court was satisfied to sequestrate and also observed that the supporting creditor's position, that it would immediately seek to be substituted as the petitioning creditor, was highly persuasive to affirm the sequestration (2025 Judgment at [46]).
These words, however, in my opinion, have to be read in the light of the words of the section and they are that the sequestration "ought not to have been made". It seems to me that the facts - the true facts - which this principle must refer to are the facts as they existed upon the date when the sequestration order was made and that facts which have come into existence since that date cannot be considered for the purpose of seeing whether it ought to have been made.
... The "true facts" which are considered in deciding whether the sequestration order ought not to have been made include those now known then to have existed, but exclude those facts which have occurred since the order was made ...
... I've file in the Magistrates Court an application to stay and proceedings, but also an application to set aside and I've filed an affidavit in support of those applications. I only, at about 3.40pm yesterday, or yesterday afternoon, I received the actual document from the file in that registry. As you may be aware, I'm up in Cairns.
... I'm not going to make any directions, unless I'm pressed by the parties, for directions for the filing of material. But let me be plain, Mr Jorgensen, a short adjournment is only being granted because at this stage the court doesn't have, and when I say the court, I mean this court, doesn't have any material or evidence from you showing that an application to set aside a default judgment has in fact been filed before the Magistrates Court. If you're able to obtain a copy of the sealed application, that should be put before the court on the next occasion, together with any evidence upon which you intend to rely in respect of that application.
[emphasis added]
(2) Should the discretion to annul be exercised?
In Hamersley Iron Proprietary Limited v Forge Group Power Proprietary Limited [citation redacted] at [64], the Court of Appeal stated, and I quote:
Insolvency processes are not to be used to coerce payment of a debt which is genuinely disputed.
6 Those who seek annulment carry a "heavy burden".
- Such an application requires you to show that the sequestration order "ought not to have been made" and, provided that is found, the Court must consider if the bankruptcy should be annulled as a matter of discretion.
- It is incumbent on you as applicant "to place before the Court all relevant material with respect to his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the actual circumstances of the applicant": Re Papps; Ex parte Tapp [1997] FCA 1031; (1997) 78 FCR 524 at 531.
(d) A failure to attend on the making of the sequestration order
(f) The basis for finding that the sequestration order ought not to have been made
(a) authorities which did not exist (sometimes being both the case name and the citation, and sometimes only the citation);
(b) authorities which did not stand for the principle which was submitted;
(c) purported quotes from authorities which did not exist;
(d) authorities of little, if any, relevance;
(e) a section of the Act which was repealed in 2016;
(f) a rule which does not exist in the FCR or the FCBR;
(a) where "artificial intelligence generates false and misleading results": Geismayr v The Owners, Strata Plan KAS 1970 [2025] BCCRT 217 at [25], Tribunal Member Peter Mennie; and
(b) where AI "create(s) fake legal citations": Ko v Li [2025] ONSC 2766 at [14], FL Myers J.
I certify that the preceding one hundred and five (105) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Wheatley.
JML Rose Pty Ltd
Jorgensen
(2007) 159 FCR 38
(2017) 52 WAR 90
(1963) 109 CLR 440
(1990) 170 CLR 306
(2000) 104 FCR 238
(1970) 16 FLR 420
(1988) 19 FCR 347
(2000) 204 CLR 158
(1999) 198 CLR 511
(2006) 155 FCR 531
(1968) 13 FLR 10
(1987) 16 FCR 396
(1907) 5 CLR 64
(2001) 183 ALR 239
(1971) 127 CLR 106
(2018) 53 WAR 325
(2023) 298 FCR 79
(2003) 127 FCR 217
(1975) 6 ALR 558
(1997) 78 FCR 524
(1987) 78 FCR 524
(1992) 36 FCR 424
(1972) 126 CLR 212