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[2002] FCA 426
respondent. Each appeal dismissed; appellants ordered to pay the costs of the respondent, including reserved costs (Orders 1-2 and Reasons [18]).
The Federal Court dismissed the Wallins' appeals against sequestration orders. The Court found the creditor had established the statutory basis for sequestration and the Wallins failed to prove they could pay their debts, or to show other sufficient cause to avoid sequestration. General claims of bias, fraud and conspiracy were not supported by precise evidence. Extensive supplementary documents were not shown to justify overturning the magistrate's decision. Appeals dismissed and costs ordered against the appellants.
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1,795 words · generated 07/07/2026
This appeal concerned two appellants, Graham and Paula Wallin, against sequestration orders made by Raphael FM on 25 September 2001. The respondent creditor was MJB Building Services Pty Limited. The underlying debt arose from taxed costs of proceedings (referred to as exhibit R5) and a judgment in the District Court; bankruptcy notices were served on the appellants in April 2001, requiring payment by mid-May 2001 ([4], [9]). Driver FM had earlier refused applications by the Wallins to set aside the bankruptcy notices and to extend time ([9]). Sequestration orders were then made by Raphael FM. The Wallins appealed to the Federal Court; they were self-represented. They filed extensive supplementary materials (eight volumes) and raised grounds including bias, factual mistake, failure to be permitted to present evidence, and allegations that the underlying judgment/proceedings were tainted by fraud and conspiracy ([2]-[6], [7], [10]).
1 cited instrument linked from this judgment.
Gyles J heard the appeals on 8 April 2002 and delivered ex tempore reasons dismissing each appeal and ordering the appellants to pay the respondent's costs, including reserved costs ([18]; Orders at head). The judgment canvassed the statutory framework under the Bankruptcy Act, the approach to fresh evidence on appeal, the adequacy of the appellants' demonstrations of solvency or other sufficient cause to avoid sequestration, and the insufficiency of their allegations of bias and of fraud or conspiracy in the underlying litigation ([10]-[17]).
Gyles J's reasoning reduces to a straightforward application of the statutory and appellate principles applicable in bankruptcy proceedings.
Statutory onus and discretion. The court emphasised that the matters required by s 52(1) of the Bankruptcy Act had been proved to the satisfaction of Raphael FM and that this was not disputed on appeal ([11]). Once those matters are proved by the creditor, it falls to the debtor to satisfy the court of either: (a) that he or she can pay his or her debts; (b) that for other sufficient cause sequestration orders ought not be made; or (c) that any residual discretion should be exercised in their favour. Gyles J summarised that onus succinctly and concluded the appellants had not discharged it ([11]).
No persuasive evidence of solvency or special circumstance. Gyles J noted that the magistrate was entitled to conclude that the appellants' evidence did not indicate solvency, that their property might be encumbered and that nothing in the appellants' materials showed other sufficient cause to displace sequestration ([13]). The court said expressly that the statute does not require consideration of additional matters beyond those relevant to s 52; the appellants offered no cogent additional factors that would justify interfering with the primary decision ([14], [11]).
Allegations of bias unsupported. Both appellants alleged bias on the part of Raphael FM. Gyles J observed that nothing brought forward on appeal afforded any “shred of credence” to that claim: the allegations were generalised, and the appellants had been present and in substance responsible for their presentation at the hearing below ([12]). Absent particularised material showing a realistic apprehension of bias, appellate intervention was not warranted.
Fraud and conspiracy allegations inadequate. The appellants contended the underlying litigation had been affected by fraud and conspiracy. Gyles J accepted that such allegations were mapped in the materials, but stressed that such serious contentions require precise identification and proper evidentiary support if they are to have credence. The magistrate had considered such assertions and was not satisfied that they warranted refraining from making sequestration orders; there was also no stay of judgment. Accordingly, the fraud-related complaints did not defeat the sequestration ([15], [16]).
Fresh evidence and procedural compliance. The appellants sought to rely on eight volumes of supplementary documents. The court noted constraints on admitting fresh evidence on appeal, the need to comply with the Rules of Court, and that the appellants had not established that the materials had been before Raphael FM or that they satisfied the requirements for fresh evidence. Gyles J therefore declined to admit those materials as a basis for overturning the decision, retaining them on the record pending any special leave application ([10], [16]).
Because the appellants did not demonstrate any appellate errors of law or fact sufficient to displace the magistrate’s discretionary decision, the appeals were dismissed and the costs ordered against the appellants ([18]).
Before this decision, the applicable law required that, in creditor petitions where the statutory matters in s 52(1) are proved, courts look to whether a debtor can either pay the claimed debt, establish other sufficient cause not to make sequestration orders, or persuade the court to exercise any residual discretion in their favour. The decision in Wallin v MJB Building Services applies and confirms that framework as the operative test on appeal: once the creditor establishes the s 52(1) elements, the burden shifts to the debtor to justify non-sequestration, and generalised or unparticularised allegations are insufficient to meet that burden ([11]).
The decision does not alter statutory law or create new principles. It applies established principles concerning: (a) the debtor's onus following proof of s 52(1) matters; (b) the approach to allegations of bias on appeal; (c) the requirement that allegations of fraud or conspiracy be specifically pleaded and supported; and (d) the requirements for the admission of fresh evidence on appeal (see [10], [11], [12], [15], [16]). The ruling is thus confirmatory rather than transformative: it reiterates that the mere assertion of substantial counterclaims or of collateral litigation does not, without persuasive evidence, prevent sequestration approved under the Bankruptcy Act.
Passage: "It was then up to the debtors to satisfy the Court (a) that he or she is able to pay his or her debts, (b) that for other sufficient cause the sequestration orders ought not to be made or (c) that any residual discretion which might exist as to orders to be made should be exercised in their favour." [11]
Passage: "Neither appellant has put anything on this appeal which gives any shred of credence to a claim of bias on the part of the learned Magistrate." [12]
Passage: "Such allegations are easy to make, but require precise identification and proper evidence to support them if they are to have credence." [16]
Passage: "The evidence which is before me does not even indicate that Mr and Mrs Wallin are solvent. We know nothing about any other creditors and know nothing about the extent to which the properties might be encumbered." [13]
This decision is most directly applicable where:
In those circumstances, Wallin confirms that appellate courts will not disturb the lower court's discretionary decision unless appellants discharge the onus described in [11], adequately particularise allegations of fraud or bias, and comply with procedural rules governing new evidence ([10], [11], [12], [16]).
The judgment itself contains no material about subsequent treatment by later courts. This decision is a single-instance Federal Court ex tempore judgment applying well-established bankruptcy and appellate principles. To determine if later courts have cited, followed, distinguished or otherwise treated Wallin v MJB Building Services Pty Ltd, targeted case law research is required in authorised databases (for example AustLII, JADE, or commercial services). The judgment provides a clear, readily-citable statement of the debtor's burden after s 52(1) matters are proved and the necessity for precise evidence when alleging fraud; whether later courts have relied upon those articulations can only be established by searching subsequent reported decisions.
This decision is fact-specific and leaves open several issues that may affect similar future cases:
Practical consequence for practitioners: when challenging sequestration, ensure the response is focused and evidenced. Precisely plead and prove solvency or other sufficient cause, properly seek stays where necessary, particularise any fraud or bias allegations, and comply strictly with rules on fresh evidence if relying on materials not before the first-instance decisionmaker.
EX TEMPORE REASONS FOR JUDGMENT 1 These are two appeals from sequestration orders made on 25 September 2001 by Raphael FM against each of Graham Wallin and Paula Wallin. The appeals have been heard together. 2 The ground of appeal taken by Paula Wallin is: "His Honour was misled, and mistaken as to the facts, and failed to take relevant considerations into account causing bias that has led to an incorrect decision. Irrelevant considerations were taken into account. I was denied access to legal advice and have not been able to put all evidence to the Court. Reliance on a High Court Fencing decision by the other side proves fraud." 3 The grounds of appeal taken by Graham Wallin are: "1. His Honour was misled. 2. Mistaken as to the facts. 3. Bias." 4 The creditor's petition was dated 23 July 2001 and was in the following terms (so far as is relevant): "1. The Respondent Debtors owe the Applicant Creditor the amount of $59,722.00, being costs arising out of proceedings in the Land and Environment Court and being the amount of the Judgment upon which the Bankruptcy Notice was based, namely Judgment of the District Court of New South Wales at Newcastle, in proceedings numbered 184 of 2000, on 25 February 2000, which Judgment includes an amount of $121.00 for "costs of attempting to enforce the Judgment", plus costs and interest thereon. 2. The Applicant Creditor does not hold security over the property of the Respondent Debtors. 3. The Respondent Debtors were at the date of the commission of the act of bankruptcy specified in paragraph 4 personally present in Australia. 4. The following act of bankruptcy was committed by the Respondent Debtors within six months before the presentation of this petition: the Respondent Debtor Graeme Wallin (also known as Graham Craig Wallin) failed on or before 14 May 2001 either to comply with the requirements of a Bankruptcy Notice served upon him on 23 April 2001 or to satisfy the Court that he had a counter-claim, set-off or cross demand equal to our [sic] exceeding the sum specified in paragraph 1 of the Bankruptcy Notice. The respondent Debtor Paula Wallin (also known as Paula Jacqueline Wallin and Paula J Miller) failed on or before 15 May 2001 either to comply with the requirements of a Bankruptcy Notice served upon her on 24 April 2001 or to satisfy the Court that she had a counter-claim, set-off or cross demand equal to or exceeding the sum specified in paragraph 1 of the Bankruptcy Notice." 5 The notice of intention to oppose the application on behalf of Paula Wallin stated the following grounds: "1. The Costs for which the Creditors Petition is being applied were gained by fraudulent means. We and all Courts have been misled by the Builder MJB Building Services Pty Ltd Mr Michael Bruggestrass. My husband Graham Wallin and I have been denied our right of reply as has our son Bill Wallin. 2. My claim against MJB Building Services Michael J Bruggestrass and Mrs Anne Bruggestrass and their Company is greater. My Costs and the damage and deterioration of my property caused by MJB Building Services exceeds their claim. 3. Settlement as proposed by the Solicitors McNeil James' Mr Greg Gilmour would leave me with no way to ever provide my son Bill Wallin who is now nearly 11 years old with a home. We have been driven into poverty by the actions of MJB Building Services as it is with very adverse effects on our health. This is not the remedy required." 6 The notice of intention to oppose the application on behalf of Graham Wallin stated the following grounds: "1. G&P&B Wallin have never had a proper right of reply. 2. G&P&B Wallin have never had a proper right of reply, and have not ever been notified sufficiently to be able to reply. 3. G&P&B Wallin have suffered considerable damage and loss as a result of the misrepresentation, fraud, nuisance, and tresspass [sic], caused by Mr Michael J Bruggestrass and MJB Building Services Pty Ltd, and Other Respondents, in related matters, who have conspired to defraud G&P&B Wallin, we also have proceedings in the High Court of Australia file No. S 182 and No. 2 183, and the Supreme Court of New South Wales, File No 10379/99, and File No. 3692/01, so therefore I ask the Court for a stay in these proceedings, to those proceedings, are properly heard and precisely resolved. 4. I am not a Lawyer, no legal aid is, or has been, available, and I am disavantage [sic] by distance to obtain access to proper legal information that/which is not easily available. 5. Parent's have primary duty to maintain child. 6. G&P Wallin have assets with just two properties of $325,000.00 that are equal to or greater then [sic] the amount of costs. 7. At the time this began we owned 2 properties and had no debits, I was employed at Kenmare Mine earning $51,000.00 plus a year and my wife was completeing [sic] her teaching degree. MJB Building Services and Michael Bruggestrass have caused us not to be able to work and earn income and maintain our property. 8. Failure to take into account relevant considerations. 9. Mistaken as to the facts. No diligent inquiry. No anxious consideration. 10. Denial of right of reply by withholding/suppression of evidence before and after FOI and subpoena. 11. No mediation that was mandatory, and no right of reply. 12. Non-compliance. Failure to act on non-compliance. 13. Gross negligence and malfeasance. 14. Unreasonableness. 15. Reliance on Costs for Court action and no Legal Aid. 16. Discrimination. 17. Conspiracy to defraud. 18. Reliance on Delegated Authority." 7 Paula Wallin swore and filed an affidavit of 13 September 2001 and Graham Wallin swore and filed an affidavit of 14 September 2001. There were annexures to each. 8 Paragraph 35 of Graham Wallin's affidavit was as follows: "I ask the Court that my affidavits and evidence/exhibits/annexures that I prepared and served for the Federal Magistrates Court matter No. S-249/2001 be allowed as evidence, and to be considered in these proceedings, and I give notice to the Respondents of that." 9 On 28 August 2001 Driver FM had heard and determined an application by each of Graham Wallin and Paula Wallin to set aside the bankruptcy notices served upon them on behalf of the respondent, and for extensions of time. Each application was dismissed. The bases for the applications is set out by Driver FM in his reasons for judgment as follows: "2. The first part is based on the proposition that this Court should go behind a judgment of the NSW Land and Environment Court. That is the judgment on which the bankruptcy notices are based, and which has been put in evidence in these proceedings as exhibit R5. That is the decision made by his Honour Lloyd J on 6 November 1997. 3. The second part is that the applicants claim to have a cross-claim or counterclaim of equal or greater value than the amount due under the bankruptcy notice served upon them which should cause the Court to set aside the bankruptcy notice. 4. In addition, the applicants seek further time to comply with the bankruptcy notice, both in the exercise of the Court's discretion under s 41(6A) and as a matter of course pursuant to s 41(7)." There was no appeal from the decision of Driver FM. 10 The appellants have prepared and filed eight volumes of supplementary documents. Counsel for the respondent objects to these documents being taken into account. It is submitted that they were not before the Court below and that no proper basis has been established to warrant admission on appeal. The Rules of Court in relation to the admission of fresh evidence on appeal have not, in any event, been complied with. A difficulty in this regard is that, in the course of his judgment, Raphael FM said: "There was tendered by Mr and Mrs Wallin a series of documents which were intended to assist me with understanding the proceedings that Mr and Mrs Wallin were bringing and to confirm that they were on foot." Both Paula Wallin and Graham Wallin are confused as to what occurred before Raphael FM, and counsel who now appears for the respondent was not present on that occasion. Graham Wallin says that there is a considerable overlap, at least, between the documents which are now produced and the documents which were tendered before the learned Magistrate. I therefore took the course of deferring ruling upon this aspect of the matter until I had heard and considered the submissions from the parties on the merits of the matter, giving leave to the appellants to refer to particular documents amongst the eight volumes of supplementary documents. 11 It is necessary to bear in mind, when considering the approach of the learned Magistrate and the principles relevant on appeal, that the matters requiring proof pursuant to s 52(1) of the Bankruptcy Act 1966 (Cth) were proved to the satisfaction of Raphael FM and there is no issue, and certainly no arguable issue, raised about that on appeal. It was then up to the debtors to satisfy the Court (a) that he or she is able to pay his or her debts, (b) that for other sufficient cause the sequestration orders ought not to be made or (c) that any residual discretion which might exist as to orders to be made should be exercised in their favour. There is no doubt that the learned Magistrate did direct his attention to both solvency and the matters put forward by the appellants as to why sequestration orders ought not to be made, but was not satisfied as to them. In those circumstances, the appellants bear the burden of establishing that something akin to a discretionary judgment has miscarried. 12 I should firstly deal with the allegation of bias. Neither appellant has put anything on this appeal which gives any shred of credence to a claim of bias on the part of the learned Magistrate. Paula Wallin has made some suggestions from the Bar table that she was not able to put matters to the Court. However, she was present and, leaving aside the difficulty that she was not represented, any deficiencies in presentation of the case were her responsibility. I note that that part of the transcript which is in evidence reveals that Graham Wallin appeared to speak for both he and his wife at the hearing below. 13 Mrs Wallin has also made some generalised complaints today about the sequestration orders being made in circumstances where valuable property was owned by the appellants. The issue of solvency and related matters was dealt with in paragraphs 6 to 10 of the decision below, and the learned Magistrate said (amongst other things): "The evidence which is before me does not even indicate that Mr and Mrs Wallin are solvent. We know nothing about any other creditors and know nothing about the extent to which the properties might be encumbered." There is no appealable error in the way that issue was dealt with. 14 Reference was made during argument to failure by the learned Magistrate to take relevant considerations into account, and as to factual errors. Apart from the matters to which I have drawn attention, the statute does not require consideration of other matters, and certainly none were advanced today. Even if there were factual errors, this would not necessarily affect a decision of the kind here, and I cannot detect any factual error which would have that effect. 15 The principal issue which has been ventilated in the argument has been the underlying dispute between the parties. The debt upon which the bankruptcy notice was founded was for taxed costs of proceedings in the Land and Environment Court of New South Wales, in a dispute involving development of land near that of the appellants. Their assertion is that actions by the respondent and others connected with the factual dispute were fraudulent and involved a conspiracy, they say that the proceedings themselves were affected and tainted by fraud and they say that they have collateral actions for damages against various parties involved, including the respondent. As was noted in the judgment below, these issues were ventilated before Driver FM at the time he refused to set aside the bankruptcy notice. They were further raised in the Court below. The learned Magistrate dealt with this issue at paragraphs 2 to 5 of the judgment. He did not regard the evidence which had been produced as satisfying him that there was any reason to refrain from making sequestration orders, and, in particular, pointed out that there was no stay of any order or judgment. A good deal has been made today of what has been called the boundary fence issue by the appellants, but I can see no error in the way in which that matter was dealt with in the judgment below. 16 I have read the various references to individual documents which have been made by either appellant, in both the appeal papers proper and the supplementary materials. In my opinion, these references do not advance the case for the appellants on this appeal. Indeed, the references support the conclusion of the learned Magistrate that that which has been produced falls well short of establishing any proper basis for declining to make orders of sequestration. The supplementary volumes should be retained with the papers until the expiry of any period for application for special leave to the High Court. They do not require any further identification. It may be, of course, that there is a grievance with some legal basis involved in the underlying circumstances, but that has certainly not been established. It would be for the trustee to consider whether there is a proper foundation for the various pieces of litigation which are on foot or which are threatened. It is to be recalled that the allegations which are made are of fraud and conspiracy. Such allegations are easy to make, but require precise identification and proper evidence to support them if they are to have credence. 17 I should say in conclusion that, apart from the opportunities to present the case before Driver FM and Raphael FM, when the matters came on before Conti J in this Court they were adjourned in order to enable the appellants to seek pro bono legal assistance. 18 Each appeal is dismissed. I order that the appellants pay the costs of the appeal, including reserved costs. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.
Counsel for the Respondent: Mr BJ Skinner
Wallin
MJB Building Services Pty Ltd
Each appeal dismissed; appellants ordered to pay the costs of the respondent, including reserved costs (Orders 1-2 and Reasons [18]).