Joseph v Segelov [2025] FCA 1340

a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained ...

1. The applicant contends that because of such a counterclaim (being the short form terminology I will use for simplicity), he had no obligation to comply with the bankruptcy notice. The only issue in that regard is whether the applicant has a counterclaim within the meaning of s 40(1)(g).
2. The applicant also submits that the bankruptcy notice is an abuse of process and should be set aside for that reason.
3. At the commencement of the hearing before me the applicant applied for an adjournment of the hearing. He also called on a notice to produce, which the respondent applied to set aside. I dismissed the application for an adjournment and I set aside the notice to produce. I will return to those matters at the end of these reasons for judgment, after I have dealt with the substantive matter.

1. A review of the exercise of the power by the registrar to dismiss the applicant's application is undertaken de novo pursuant to s 35A(5) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). "[T]he matter is considered afresh on the evidence and on the law at the time of the review, that is at the time of the hearing de novo" as if the Court were considering the claim for the first time: Bechara v Bates [2021] FCAFC 34; 286 FCR 166 at [17] and [20] per Allsop CJ, Markovic and Colvin JJ. "That is to say, there must be a complete rehearing of the facts and the law as they exist when the judge reviews the order made by the registrar": Totev v Sfar [2008] FCAFC 35; 167 FCR 193 at [10] per Emmett J, adopted in Bechara v Bates at [21]. The judge reviewing the registrar's order "begins afresh and exercises for himself or herself any discretion exercised by the registrar"; the parties in effect "commence the proceeding again": Totev v Sfar at [13] adopted in Bechara v Bates at [21].

Setting aside a bankruptcy notice in reliance on a counterclaim

1. In order to succeed in setting aside the bankruptcy notice, the applicant must "satisfy" the court of the matters referred to in s 40(1)(g) of the Bankruptcy Act. He is not required to prove those matters, as on a final hearing; "the court should be satisfied that [he] has a claim deserving to be finally determined"; he must "satisfy the court that there is sufficient substance to the counter-claim, set-off or cross-demand asserted to make it one which the debtor should, in justice, be permitted to have heard and determined in the usual way, rather than be forced to comply with the bankruptcy notice by payment or to commit an act of bankruptcy": Glew v Harrowell, in the matter of Glew [2003] FCA 373; 198 ALR 331 at [11]- [12] per Lindgren J, applied in Fitzgerald v Fitzgerald [2021] FCAFC 225 at [8]- [9] per Logan J, Rangiah and Downes JJ agreeing.

Setting aside a bankruptcy notice as an abuse of process

1. The court has an inherent or implied power to set aside a bankruptcy notice as an abuse of process where it is satisfied that it is in the interests of justice to do so: Re Sterling; Ex parte Esanda Ltd [1980] FCA 75 (AustLII citation [1980] FCA 61); 30 ALR 77 at 82 per Lockhart J and Seller v Deputy Commissioner of Taxation [2011] FCA 865; 282 ALR 80 at [14]- [20] per Flick J. There is also a statutory source of power in s 30(1)(b) of the Bankruptcy Act.
2. The party alleging an abuse of process, being the applicant, bears the onus of establishing the purpose for which the bankruptcy notice was issued and that it was improper: Nobarani v Mariconte [2021] FCAFC 96 at [32] per Allsop CJ, Farrell and Derrington JJ. The allegation of an abuse of process is a serious one which cannot be made without a sufficient factual foundation and the party alleging it bears a "heavy onus" in establishing its existence: Williams v Spautz [1992] HCA 34; 174 CLR 509 at 529; Nobarani at [32]. The time at which to ascertain whether a bankruptcy notice is an abuse of process is the time when it is issued: Nobarani at [33]. It is not an improper purpose to issue a bankruptcy notice for the purpose of having a debt paid, so long as the creditor intends to invoke the Court's bankruptcy jurisdiction if it is not: Nobarani at [42]-[43].

1. The applicant and the respondent were married to each other in 1994, they separated in 2011 and they were divorced in 2013.
2. On 12 January 2018, Watts J in the Family Court of Australia (as it was then styled) made a number of orders dealing with the parenting and property settlement consequences of the divorce. Order 28 was that the respondent pay the Commissioner of Taxation "an amount of $200,000, which sum will be credited by the [Commissioner] against the current outstanding tax owing by the [applicant]." The orders did not make any express provision with respect to when that sum had to be paid.
3. The applicant appealed against the orders of Watts J. The appeal was dismissed by the Full Court of the Family Court on 3 December 2018.
4. On 3 and 4 January 2019, the respondent paid the sum of $200,000 to the Commissioner in two tranches of $100,000 each. That was in satisfaction of order 28 of 12 January 2018.
5. On 6 December 2023 and 21 August 2024, orders were made in Division 1 of the Federal Circuit and Family Court of Australia (the Family Court) that the applicant pay the respondent costs fixed in the sums of $7,822.53 and $15,000 respectively. Those orders were made in related proceedings.
6. On 19 February 2025, bankruptcy notice BN276278 was issued in the amount of $22,822.53, being the sum of the two costs orders. The bankruptcy notice together with copies of the orders founding the debts claimed in the bankruptcy notice were served on the applicant on 20 February 2025.
7. On 10 March 2025, the applicant applied for the bankruptcy notice to be set aside on the ground that he had a counterclaim against the respondent within the meaning of s 40(1)(g). The substance of the counterclaim relied on by the applicant was that he suffered loss and damage because of the respondent's tardy compliance with order 28 of the Family Court on 12 January 2018. The applicant claims that the consequence of the payment nearly one year after the order was made was that the Commissioner raised a general interest charge on the applicant's tax liability. At the time of the hearing before the registrar, that amount was said to exceed the debt underpinning the bankruptcy notice by nearly $5,000, and to be increasing daily.
8. That application to set aside the bankruptcy notice was dismissed with costs by the registrar on 19 May 2025.
9. In the meanwhile, on 18 March 2025, the applicant had filed a "contravention application" in the Family Court in which he made the following claim:

Due to breach of Order 28 and the financial suffering I have encountered, I am seeking the Court award me an amount equivalent to the interest payable by me to the ATO on the amount late paid between 12 January 2018 and 3 and 7 January 2019 (first and second payments) and then the interest on interest levied on such amounts up to the hearing date at the specified ATO rate.

1. On 10 June 2025, Boyle J in the Family Court dismissed the applicant's contravention application with no order as to costs. The applicant appealed against that dismissal. The appeal was heard by the Full Court of the Family Court on 28 August 2025. On 10 September 2025, the Full Court dismissed the appeal and ordered the applicant to pay the respondent's costs fixed in the sum of $11,054.

1. Following the dismissal of his appeal by the Full Court of the Family Court on 28 August 2025, the applicant accepts that the counterclaim which he had raised in opposition to the bankruptcy notice before the registrar cannot succeed. As a consequence, on 20 October 2025 he filed a further affidavit in the proceeding raising a fresh counterclaim.
2. In brief, the applicant contends that in the hearing before the Family Court in 2017 which dealt with the parenting and property settlement consequences of the parties' divorce, the respondent fraudulently failed to disclose significant assets. He says that only became apparent to him, and could only reasonably have become apparent to him, when the respondent was cross-examined during the hearing of an application relating to child support in the Family Court on 10 June 2025.
3. On 9 October 2025, the applicant made a further application in the Family Court to vary the orders made on 12 January 2018 in reliance on the alleged fraudulent non-disclosure by the respondent. The applicant claims that the variation he seeks will result in $359,375.47 being payable to him. That proceeding is listed for its first return in the Family Court on 17 December 2025.

1. Given the principles identified above with regard to the review application being a hearing de novo to be determined on the evidence and circumstances pertaining at the time of its hearing, there is no reason why the applicant cannot rely on a new and different counterclaim to the one that he previously relied on. I therefore reject the submission of the respondent that the applicant is confined to the counterclaim that he relied on before the registrar, and I reject the submission of the respondent that the Court has no power to make an order setting aside the bankruptcy notice on any basis other than that relied on before the registrar. Those submissions are based on an erroneous understanding of the nature of the review proceeding.
2. As mentioned, the applicant's postulated counterclaim depends on establishing fraudulent nondisclosure by the respondent at the time of the hearing of the property settlement proceeding in 2017. It also depends on the applicant establishing that such fraudulent nondisclosure would likely result in a variation of the property settlement orders in his favour in an amount exceeding the judgment debt underpinning the bankruptcy notice.
3. It is well-established that where a case based on fraud is alleged, "it should be pleaded specifically and with particularity. A pleading of fraud will necessarily focus attention upon what it was that the person making the statement intended to convey by its making. And the pleading must make plain that it is alleged that the person who made the statement knew it to be false or was careless as to its truth or falsity": Forrest v Australian Securities and Investments Commission [2012] HCA 39; 247 CLR 486 at [26].
4. The first step in the fraud claim relies on what the respondent disclosed in the property settlement proceeding. In that regard, in a standard form questionnaire-type affidavit headed "Updated Financial Statement" affirmed on 13 July 2017 the respondent gave information of her "financial circumstances" which showed a weekly cash flow deficit of approximately $1,000 and assets and liabilities (each of approximately $1,900,000) cancelling each other out. That is to say, her "financial circumstances" were grim and would not support subsequent substantial payments being made by her.
5. Of particular significance is Part L of the questionnaire in which the respondent answered "NIL" to the questions as to her "Interest in any trust or deceased estate" and "Other financial resources".
6. The second step in the claim is the applicant's contention that the respondent subsequently made the following payments:

(1) $200,000 in January 2019 to the Commissioner to the credit of the applicant's tax account as ordered by Watts J on 12 January 2018, as detailed above;

(2) $208,990 at an unknown time to S4S Pty Ltd in discharge of the applicant's debt to that company as reflected in an adjustment schedule in the reasons of Watts J of 12 January 2018;

(3) $113,161 at an unknown time to the Commissioner in satisfaction of the respondent's own tax liability;

(4) $765,057.78 on 5 December 2018 in discharging the mortgage on what was previously the family home;

(5) $147,332.90 being the expenditure by OTYC Pty Ltd, a company established by the respondent, to fit out its business premises.

1. Those sums amount to approximately $1.5 million which is an amount way in excess of what the respondent could have been able to pay based on the financial circumstances disclosed by her in June 2017.
2. There is some difficulty with a number of the "payments" that the applicant relies on. However, it is unnecessary to go into those because it can at least be accepted that $765,057.78 was paid in December 2018 to discharge the mortgage debt and $200,000 was paid to the Commissioner in January 2019. That sum of nearly $1 million is sufficient to establish the second step of the applicant's counterclaim.
3. The third step in the applicant's counterclaim is to exclude the reasonable possibility that the payments referred to in the second step were funded in some way other than from the respondent's own financial resources, in particular from her family. In that regard, the applicant relies on answers given by the respondent in cross-examination in the proceeding in the Family Court on 18 July 2017, principally that the respondent said that she had been told by her mother that her mother would not help her out financially in the future.
4. There are a number of problems with the applicant's postulated counterclaim.
5. First, contrary to his submissions, there is no justifiable basis why the claim was not brought at a much earlier time. He says that he could not bring it before June 2025 because it was only then that he learnt of critical integers to the claim. When pressed to identify, precisely, what he learnt only in June 2025 he was unable to do so. He said things such as it was only then that "gaps" in the information became apparent, in particular when the respondent produced no documents in response to an extensive notice to produce.
6. The true position is that the applicant knew what the respondent set out in her financial disclosure affidavit in 2017. He also knew in 2019 that she had paid $200,000 to the Commissioner, and there is nothing in the evidence to establish that he did not know - let alone that he could not reasonably have known - about the other payments on which he relies at a much earlier time. Indeed, the applicant's affidavit in the Family Court affirmed on 8 October 2025 identifies that the first three payments relied on by him, totalling more than $500,000, were all required by the orders of Watts J back in 2018. On his case, that sum could not have been paid from the respondent's own resources.
7. The result is that there is no justification for the present claim being brought at this very late stage. That may mean that the claim is statute barred, but in any event it has relevance to issues I will return to, namely the applicant's application to adjourn the hearing before me and the respondent's application to set aside a notice to produce that the applicant called on.
8. Secondly, and decisively, with reference to the third step in the counterclaim there is insufficient basis to be satisfied that the postulated counterclaim is deserving of being finally determined; there is insufficient basis to be satisfied that the applicant should, "in justice", be permitted to have the claim heard and determined in the usual way. The reasons for that are as follows.
9. The one-page extract from the transcript of the cross-examination of the respondent before the Family Court on 18 July 2017 reveals a number of things. First, it was the applicant's contention that the respondent's family is very wealthy. In that regard, it was put to the respondent by the applicant's counsel that the respondent's mother's net wealth is measured in "the multitudes of millions", and the applicant stated before me that the respondent's family is "one of the wealthiest families in Australia". Thus, it can be accepted that on the applicant's case the respondent's mother, and possibly other family members, were in the position to make substantial payments on the respondent's behalf, including the payments relied on by the applicant in step two.
10. Also, the respondent's mother had from time to time helped her out by making payments on her behalf. The respondent's evidence on 18 July 2017, read fairly, is that although she had been helped out by her mother in the past, her mother had told her that she would not help her "in the future" or "forever" and that she, that is the respondent, should "[g]o to court" and "get what we can".
11. On the basis of that evidence, there would be nothing surprising in the respondent's mother continuing to help her out in the future by making payments on her behalf. If her mother did that, she would not be the first parent to have continued to give their child financial support after having told them that they would not do so. Indeed, given the respondent's affidavit with regard to her meagre financial resources and the fact of the subsequent payments made on her behalf, it is probable that the payments were made from funds supplied by the respondent's mother or other family member. Certainly, there is no basis to suppose that they were paid from the respondent's own financial resources which she had failed to disclose.
12. The applicant seeks to counter that by saying that the respondent failed to disclose in her affidavit referred to in relation to step one that, as part of her "financial resources", she could rely on the support of her mother. The difficulty with that is twofold. First, "financial resources" as referred to in the form is "financial resources" as referred to in s 75(2)(b) of the Family Law Act 1975 (Cth). Such financial resources do not include voluntary payments to the relevant party or on their behalf. The financial resources that are required to be disclosed include a source of financial support on which the party is "capable of drawing"; such a source must "involve something more than an expectation of benevolence on the part of another": Hall v Hall [2016] HCA 23; 257 CLR 490 at [54]. Secondly, even if "financial resources" were to be construed more broadly so as to capture whatever expectation the respondent might have had with regard to support from her mother, there is nothing to suggest that the respondent was conscious of what would then have been her error of nondisclosure in not including such an expectation. Without such consciousness of wrongdoing or carelessness in relation to it, the case for fraud must fail.
13. In the circumstances, the postulated counterclaim has no prospects of success.

1. The applicant has presented evidence that his total liabilities, being principally an income tax liability of nearly $5 million, very substantially exceed his assets. Indeed, his assets, including superannuation, amount to approximately $120,000. On that basis, the applicant submits that the sequestration of his estate in reliance on the bankruptcy notice will achieve no financial benefit whatsoever for the respondent. He submits that the available inference is therefore that the respondent caused the bankruptcy notice to be issued for some ulterior purpose, constituting the issuance of the bankruptcy notice an abuse of process.
2. In addition, the applicant relies on an answer said by him to have been given by the respondent in cross-examination on 11 July 2025 in the Family Court. His affidavit evidence is that the respondent was asked "why a Bankruptcy Application was being pursued when there are clearly no monies available" to which the respondent is said to have answered, "well I needed to do that in order to get paid".
3. There is no evidential basis to the applicant's submission that the bankruptcy notice was issued for an improper purpose. In that regard, the mere fact that the sequestration of the applicant's estate is not likely to yield any financial benefit to the respondent is insufficient. In particular, in this case the debt is modest meaning that it cannot be concluded that the issuance of the bankruptcy notice was not for the purpose of securing payment of the debt. In that regard, the applicant's own evidence is that he has a weekly income, albeit meagre, and that the weekly income of the three people in his household, being himself, his de facto partner and his adult son, amounts to nearly $5,000. It is not known what assets his household members have which, taken together with the weekly household income, means that it would not have been unreasonable for the respondent to expect that the issuing of the bankruptcy notice might have the consequence that the debt would be paid.
4. The applicant also submits that the respondent's failure to rely on earlier costs orders in her favour, and to wait until about six months had passed after the judgment for costs in her favour of $15,000 which in part underpins the bankruptcy notice, is evidence of an ulterior purpose. He submits that that purpose is to achieve the sequestration of his estate in order to stymie his further Family Court proceedings. I reject those submissions. I am not satisfied that there is any proper basis to conclude that that is the respondent's purpose. The earlier costs awards were unquantified, and in any event the relevant inference cannot be drawn from the fact of them not having been pursued at an earlier time.
5. In the circumstances, the applicant's abuse of process case fails.

1. For those reasons, the applicant's application for review of the registrar's decision filed on 5 June 2025 must be dismissed. The bankruptcy notice therefore stands. There is no need to make any further order or declaration in that regard.
2. As the respondent has been successful, the applicant should pay her costs.

1. At the outset of the hearing, the applicant applied to adjourn it until after the determination of his application in the Family Court to vary the property settlement orders made by Watts J back in February 2018 (see [22] above). He submitted that there would be no prejudice to the respondent if such an adjournment were granted.
2. The applicant submitted that because the hearing of his review application was previously adjourned by consent until after the judgment of the Full Court of the Family Court on the appeal against the orders dismissing his "contravention application", the hearing should again be adjourned on a like basis. I do not accept that submission. The fact of the previous adjournment by consent goes nowhere in supporting a subsequent adjournment which is opposed. Indeed, if anything, the previous delays in the matter mitigate against a further adjournment.
3. The difficulty with the applicant's submission that the proceeding should be adjourned to enable his counterclaim to be determined in the Family Court is that, if accepted, it would lead to the almost inevitable adjournment of every application to set-aside a bankruptcy notice which relied on there being a counterclaim within the meaning of s 40(1)(g) of the Bankruptcy Act. However, the legal principles identified above are against such an approach. The point is not that the question whether the bankruptcy notice should be set aside should be put off pending the determination of such a counterclaim, but rather whether the postulated counterclaim is deserving of being finally determined, or there is sufficient substance to the postulated counterclaim such that justice requires that it be determined. It is only if the court is relevantly satisfied of those matters that the bankruptcy notice would be set aside to enable the counterclaim to be determined. Refusal of the adjournment application would enable that inquiry, whereas granting the adjournment application would defeat it.
4. It is also not the case that there would be no prejudice if the hearing was adjourned. The respondent would be prejudiced by the consequent further (probably lengthy) delay of her creditor's petition in reliance on the bankruptcy notice. She would also lose the benefit of the law on s 40(1)(g) which requires that the counterclaim have some merit before having to defend it in some other proceeding on account of the bankruptcy notice being set aside.
5. The interests of the administration of justice are also prejudiced by the waste of the Court's resources attendant on an adjournment and the lost opportunity for some other litigants to have been heard instead.
6. In the circumstances, I was not satisfied that the discretion to adjourn the proceeding should be exercised. The matter was ready to be heard before me. Justice between the parties, as well as efficient case management, required that it be heard.

1. On 23 October 2025, which is to say three days before the hearing, the applicant served a notice to produce on the respondent requiring the production of documents at the hearing. The notice to produce sought 19 categories of documents. The notice was aimed at obtaining documents to establish the respondent's true financial circumstances in 2017 as well as the source of funds for the various payments subsequently made for her benefit - being the payments the applicant relies on to establish his counterclaim.
2. Even on the applicant's version (which I do not accept), he was aware of the facts giving rise to the new counterclaim in June of this year following the hearing before Boyle J. However, he waited until October to file his affidavit which articulates the counterclaim for the first time, and then serve the notice to produce. Compliance with the notice to produce would almost certainly scupper the listing of the hearing - either because to find and produce all the documents would take too long or because once produced some time would be required by the applicant to consider them. The notice to produce should therefore have been served, if at all, at a much earlier time. To leave it so late was oppressive and prejudicial.
3. Further, the extensive categories in the notice produce are excessive and oppressive. The notice to produce is apparently aimed at trying to establish a case which is at best speculative and wishful. There is no justification for allowing it to stand.
4. For those reasons, I set aside the notice to produce.

Part XIVB of the Family Law Act 1975 (Cth)

1. Part XIVB of the Family Law Act contains provisions making it an offence to communicate an "account" of proceedings under that Act to the public if the account identifies certain people involved in the proceedings. It has been necessary in these reasons for judgment to refer to proceedings in the Family Court between the applicant and the respondent, including to set out certain details of those proceedings which amount to an "account" of them. Moreover, inevitably that account identifies the parties to the Family Court proceedings. On the face of it, publishing such an account in the form of these reasons for judgment would come within the proscription in s 114Q(1) of the Family Law Act.
2. However, for the reasons given by Colvin J in South Seas Holdings Pty Ltd (Trustee) v Commissioner of Taxation [2025] FCA 848 at [724], I do not consider that the terms of s 114Q(1) limit the discharge of the Court's constitutional responsibility to provide reasons. Also, when I raised these issues with the parties in the hearing, both parties accepted that there was no prejudice to them in having my reasons for judgment made public in the usual way and they confirmed that they do not object to my reasons being made public. I do not see that the publication of reasons for judgment to the public that include such an account of the proceedings in the Family Court as is necessary to explain my decision in this case can or will cause prejudice to the proper administration of justice as referred to in s 37AG(1)(a) of the FCA Act. In particular, there are no interests of minor children that require protection. In any event, no suppression or non-publication order was sought.
3. There is an alternative route to the same conclusion. Section 114Q(2) provides that the offence provision in sub-s (1) does not apply if the communication is in accordance with a direction of "a court" or is otherwise approved by "a court". Section 4(1) of the Act contains this definition:

court, in relation to any proceedings, means the court exercising jurisdiction in those proceedings by virtue of this Act, the Federal Circuit and Family Court of Australia Act 2021, the Child Support (Assessment) Act 1989 or the Child Support (Registration and Collection) Act 1988.

1. The references to "a court" in s 114Q(2) are not restricted to being references "in relation to any proceedings". For that reason, I do not consider that those references are restricted to a court exercising jurisdiction under the Acts referred to in the definition of "court". There is support for that construction in The Queen v Howe (1978) 19 SASR 303 at 308-309 per White J, Hogarth ACJ and Jacobs J agreeing. Although in South Seas Holdings at [720]-[723] Colvin J identified considerations going the other way, his Honour found it unnecessary to decide the point. On my interpretation, this Court has the power under s 114Q(2) to direct or approve the communication of the account of the Family Court proceedings to the public.
2. In light of the attitude taken by the parties as recorded above, and the important public value in open justice, including that courts publish their reasons for public scrutiny and understanding, I approve the publication of my reasons to the public.

I certify that the preceding sixty-three (63) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.