Wilkinson Seafood Pty Ltd as trustee for the Wilkinson Seafood Unit Trust v Merhabi [2026] FedCFamC2G 128

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 24.04(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2025 (Cth)), or to record a variation to the order pursuant to r 24.04 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2025 (Cth).

1. A sequestration order was made against the estate of the respondent on 28 August 2024 by order of Registrar Schmidt. The respondent seeks an order that such sequestration order be set aside pursuant to the provisions of s. 256 of the Federal Circuit and Family Court of Australia Act 2021 (Cth).
2. The sequestration order was based upon a creditor's petition filed on 23 May 2024 which asserted that the respondent had committed an act of bankruptcy, namely his non-compliance with a bankruptcy notice issued on 21 February 2024.
3. The bankruptcy notice was issued based on a judgement obtained by the applicant against the respondent in the Queensland Civil and Administrative Tribunal (QCAT) on 24 July 2023. The judgement was a judgement in default of the appearance of the respondent and was in the amount of some $19,420.00. The judgement was registered as a judgement in the Southport Magistrate's Court on 24 July 2023.
4. On 23 August 2024, some five days before the making of the sequestration order, the respondent filed an application in the QCAT proceeding seeking an order that the default judgement entered in favour of the applicant be set aside. That act was not prohibited by operation of the provisions of s.60 of the Bankruptcy Act 1966 (Cth).
5. On 10 September 2024, QCAT ordered that the default judgement be set aside. [1] On the same day, an order was made by a Registrar of the Magistrates Court at Southport setting aside the QCAT decision registered in that Court on 24 July 2023. [2]
6. It was submitted on behalf of the respondent that the respondent was, at the time of the hearing before this Court, defending the QCAT claim and his purported liability for such claim.

1. The relevant principles governing the review of the decision of a Registrar to make a sequestration order were set out in the judgement of Bechara v Bates [2021] FCAFC 34 at [27] per Allsop CJ, Markovic and Colvin JJ.
2. A review hearing is a hearing de novo. As was accurately submitted on behalf of the respondent in the written submissions filed on his behalf: [3]

[9] The hearing on the review is prosecuted by the creditor, who bears the onus to prosecute its petition.

[10] The matters to be proved are those requirements listed in s 43(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), being, in summary:

(a) the debtor has committed an act of bankruptcy;

(b) at the time when the act of bankruptcy was committed, the debtor was, among other things, personally present or ordinarily resident in Australia, or had a dwelling house or place of business in Australia; and

(c) the creditor has presented a petition in respect of that act of bankruptcy.

[11] Section 44 of the Bankruptcy Act stipulates certain conditions on which a creditor may petition. This includes that the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition.

[12] Section 40 of the Bankruptcy Act defines when a debtor commits an act of bankruptcy. It relevantly provides:

(1) A debtor commits an act of bankruptcy in each of the following cases:

...

(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

(i) where the notice was served in Australia - within the time fixed for compliance with the notice; or

(ii) where the notice was served elsewhere - within the time specified by the order giving leave to effect the service;

comply with the requirements of the notice or satisfy the Court that he or she has 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

[13] The Court must be satisfied of the matters on which proof is required by s 52(1) of the Bankruptcy Act and must exercise for itself the discretions under ss 52(1) and 52(2).

[14] Section 52 of the Bankruptcy Act provides:

(1) At the hearing of a creditor's petition, the Court shall require proof of:

(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b) service of the petition; and

(c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.

(2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:

(a) that he or she is able to pay his or her debts; or

(b) that for other sufficient cause a sequestration order ought not to be made;

[15] Section 52 requires the court to be satisfied with the proof of the fact that the debt on which the petitioning creditor relies is still owing.

[16] Even where a petitioning creditor has a prima facie right to a sequestration order once proof of the matters required by s 52(1) has been satisfied the Court retains a discretion to refuse such an order if the debtor is able to pay their debts or for "other sufficient cause".

[17] A sequestration order has grave consequences. Accordingly, satisfactory proof of the petitioning creditor's debt is required - the Court must be satisfied that there really is a debt due to the petitioning creditor.

[18] Where the underlying judgment debt has been set aside at the time of the hearing, a court would be slow to find that the parties should not be given the opportunity of having the benefit of the determination of those underlying proceedings. This is said to be consistent with the reasons in Ahern v DCT (Qld) (1987) ALR 137.

[19] In Ahern v DCT (Qld) [1987] FCA 312; (1987) 76 ALR 137 at 148, Davies, Lockhart and Neaves JJ held:

It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of the debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds: Re Rhodes; Ex parte Heyworth (1884) 14 QBD 49; Bayne v Baillieu [1907] HCA 39; (1907) 5 CLR 64 and Re Verma; Ex parte DCT [1984] FCA 340; (1985) 4 FCR 181. These cases rest on the broad principle that before a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences.

[20] In Hashmi v Akter [2013] FCCA 728, Raphael J stated:

The second ground of application is for a review of the Registrar's decision, and that poses different criteria. A court sitting in review of a Registrar's decision is sitting in a hearing de novo, Martin v Commonwealth Bank of Australia [2001] FCA 87; (2001) 217 ALR 634, and so it must deal with the facts as they are on the day of that hearing, and not the facts as they were on the day of the hearing before the Registrar. Today I am aware that the default judgment has been set aside, and I am faced with an application for a sequestration order in respect of which the judgment underlying the bankruptcy notice - and hence the act of bankruptcy - is no longer in existence. A court considering those facts would be hesitant in making a sequestration order - particularly when the parties are represented, as they are here. The court would take into account the conduct of the debtor and be concerned at what one might consider to be a last gasp attempt to avoid the inevitable. But it would note that another court, to which it would apply the doctrine of comity, has determined that the default judgment should be set aside. And I think, in ordinary circumstances, would decline to make a sequestration order, although it would not set aside the petition.

[21] Even where the judgment has not been set aside, there is authority for the principle that if the originating process is not served, and default judgment is obtained in relation to the process which was not served, that default judgment is, for bankruptcy purposes, a nullity and no sequestration order ought to be made, unless there is a legislative provision or rule of a court which deems service of the default judgment to have occurred, in the events that happened.

[22] In Civic Video Pty Ltd v Warburton [2013] FCA 934, Jacobson J stated:

[55] The issue does not appear to have been considered by an appellate court in Australia but the leading authorities are the decision of Pincus J in Re Marsh; Ex parte Marsh and Paramount Leisure Products Pty Ltd [1991] FCA 558; (1991) 32 FCR 482 and the decision of von Doussa J in Re Willshire‐Smith; Ex parte Randle & Taylor Services Pty Ltd (1994) 48 FCR 371.

[56] The effect of Re Marsh and Re Willshire‐Smith was accurately stated by Lucev FM in Croft v Becton at [69]. What follows from those authorities is that if it is found that the originating process which gives rise to a default judgment was not personally served, then the default judgment is a nullity and a court exercising bankruptcy jurisdiction will not make a sequestration order based on the default judgment unless there is a legislative provision or rule of court which deems service to have occurred in the events which happened.

[57] Here there was a rule of court which would have enabled Civic to rely upon the deeming effect of service, namely R 10.14. However, Civic did not avail itself of that possibility.

[58] It follows in my view that the default judgment in the present case was not capable of supporting the bankruptcy notice and a sequestration order cannot be made. Moreover, the authorities establish that even if the default judgment was not a nullity, the court should not in the exercise of its discretion make a sequestration order: Rafaraci v Pearce [2003] FCA 1307 at [24] per Tamberlin J.

[23] In Rafaraci v Pearce & Heers [2003] FCA 1307, Tamberlin J stated at [24]:

The due enforcement of default judgments by processes of the Act are of great importance to the status of an alleged debtor. It is therefore critical that the requirement of service of originating and other essential processes should be established with sufficient certainty, on the balance of probabilities, to warrant the making of the order in an appropriate case. Failure to duly serve process goes to the essence of the conception of due process. If Rafaraci's evidence is accepted, then he has been deprived of a hearing in the Queensland Court, there has been no act of bankruptcy, and he was also deprived of a hearing on the Creditor's Petition. Apart from certain ex-parte proceedings, the concept that an order can validly be made against a person who has had no proper notification of the intention to apply for it is foreign to basic principle The Bankruptcy Notice in this case is founded on a default judgment. If it is proved or admitted that the originating proceedings were not served, the judgment must generally be treated as invalid, and any enforcement proceedings as wrongly based. If it can be shown that a default judgment founding the Bankruptcy Notice was entered, although necessary process was not served, the Court should not in the exercise of its discretion make a Sequestration Order. If an order is made without proper service it should be annulled: see Willshire-Smith Re; Ex parte Randle & Taylor Services Pty Ltd (1994) 48 FCR 371 at 374-5Craig v Kanssen[1943] KB 256 at 62 and Re Marsh; Ex parte Marsh v Paramount Leisure Products Pty Ltd [1991] FCA 558; (1991) 32 FCR 482Hill v BP Australia Ltd [1998] FCA 1303.

1. It was conceded on behalf of the applicant that the sequestration order ought to be set aside if it was found that the bankruptcy notice had not been properly served. [4]
2. It was also conceded on behalf of the applicant that it could not rely upon the purported postal service of the bankruptcy notice on the respondent. It was nonetheless submitted on behalf of the applicant that due service had been effected upon the respondent by email.
3. As to service of the bankruptcy notice by email, both parties submitted that service could be so effected pursuant to the provisions of Regulation 102 of the Bankruptcy Regulations 2021 (Cth), s. 28A of the Acts Interpretation Act 1901 (Cth) and ss. 9(1) and 9(2) of the Electronic Transactions Act 1999 (Cth). Such position was supported by authority. [5] Feutrill J relevantly considered the operation of r. 102 as at 6 April 2022 and found that because a bankruptcy notice was "the giving of information" within the meaning of s. 9(5)(c) of the Electronics Transactions Act 1999 (Cth) such Act applied in relation to service of a Bankruptcy Notice.
4. As at the time of the purported service of the bankruptcy notice upon the respondent on 22 February 2024, r. 102 (which commenced on 6 April 2022 before its amendment on 17 December 2024) relevantly provided as follows:

(1) Unless the contrary intention appears, if a document is required or permitted by the Act or this instrument to be given or sent to, or served, on a person (other than the Inspector-General, the Official Receiver or Official Trustee) the document may be:

(a) sent by a courier service to the person at the address of the person last known to the person serving the document; or

(b) left, in an envelope or similar packaging marked with the person's name and any relevant document exchange number, at a document exchange when the person maintains a document exchange facility.

Note 1: See s. 28A of the Acts Interpretation Act 1901.

Note 2: The Electronics Transaction Act 1999 deals with giving information in writing by means of an electronic communication.

(3) Paragraphs 9(1)(d) and (2)(d) of the Electronics Transactions Act 1999 (Cth) do not apply to documents that are required or permitted by the Act or this instrument to be given or sent to, or served on, a person.

Note: Paragraphs 9(1)(d) and (2)(d) of the Electronics Transactions Act 1999 deal with the consent of the recipient of information being given by way of electronic communication.

1. As was submitted on behalf of the respondent, section ss. 9(1) and (2) deal with service by electronic means where, "if under a law of the Commonwealth" a person is required or permitted to give information in writing respectively, "that requirement is taken to have been met if the person gives the information by means of electronic communication". Each of sub-sections 9(1)(a) and 9(2)(a) provided as follows:

(a) In all cases - at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference.

1. In her affidavit filed on 23 May 2024, Ms Samara Robins deposed that on 22 February 2024 she emailed a copy of the bankruptcy notice to two email addresses related to the respondent which were found in the documentation which was filed with the Summons which sought registration of the QCAT decision in the Southport Magistrates Court. The email formed part of annexure SLR-1 to the affidavit of Ms Robins, being Document 4 on p. 79 of such annexure. Ms Robins also deposed at paragraph 9 of her affidavit that she had emailed the bankruptcy notice on 22 February 2024 to the following email addresses: [6]

(a) palmbeach@hunkydoryfish.com.au; and

(b) m_merhabi@hotmail.com.

1. In support of the submission that the bankruptcy notice had been properly served upon the respondent, it was submitted on behalf of the applicant that it was reasonable for the applicant to expect that the bankruptcy notice would be readily accessible by the respondent if sent to the said email addresses because: [7]

(a) The respondent had included those two email addresses as the contact details for him on the "Hunky Dory (Palm Beach)" application for credit form dated 2 October 2020 in his capacity as a director of the company which ran the Hunky Dory (Palm Beach) business. [8]

(b) The applicant had included the email address of m_merhabi@hotmail.com as the respondent's email address in the QCAT application filed on 16 May 2023. [9]

(c) The applicant's solicitors did not receive any email or other notification that the email sent to m_merhabi@hotmail.com had been returned as undeliverable.

1. Counsel for the applicant further submitted that on 13 September 2024 the respondent listed the email address m_merhabi@hotmail.com on his affidavit filed in support of his Magistrate's Court Application to set aside the applicant's default judgement. [10]
2. It was submitted on behalf of the respondent that the applicant could not have held the relevant reasonable expectation that the emails sent on 22 February 2024 by Ms Robins would have come to the attention of, or would have been readily accessible by, the respondent. The Court accepts such submission for the following reasons:

(a) On 18 April 2023, emails sent to palmbeach@hunkydoryfish.com.au and m_merhabi@hotmail.com were returned as undeliverable. Subsequent attempts to contact the respondent were made by text, not email. [11] The fact that the emails were returned as undeliverable some 9 months earlier ought to have flagged to Ms Robins that there was a reasonable expectation that the emails, if sent again, would again not come to the respondent's attention or be accessible by him.

(b) The fact that the two email addresses appeared on a credit application form some 3.5 years before the bankruptcy notice was attempted to be sent to the respondent by emails sent to such addresses, having regard to the return of the emails sent on 18 April 2023 as undeliverable, was of no moment. The earlier return of emails sent to such email addresses ought to have motivated the applicant to effect personal or substituted service of the bankruptcy notice upon the respondent.

(c) The fact that the respondent used the email address m_merhabi@hotmail.com in an affidavit filed in support of an application to set aside the default QCAT judgement on 13 September 2024 - some 6.5 months after the emailing of the bankruptcy notice to the two email addresses on 22 February 2024 - was irrelevant. The relevant time for consideration as to whether there was a reasonable expectation that an email would be accessible by the respondent was as at the time of the sending of such emails on 22 February 2024, and not at some later date.

(d) The respondent had over time used a few email addresses. It ought to have been appreciated by the lawyers for the applicant that sending the emails to the two identified email addresses was not an assured way of bringing the bankruptcy notice to the respondent's attention unless it had first been verified that such email addresses were accessible to the respondent.

(e) Ms Robins did not depose that at the time she sent the emails on 22 February 2024 she had a reasonable expectation that the emails sent on 22 February 2024 would come to the attention of, or would have been readily accessible by, the respondent. Had she had such an expectation at the time of sending the emails, one would have expected that she would have deposed to that in her affidavit. There is thus an evidentiary void in respect of the very question that the Court has been asked to adjudicate upon.

1. The Court is not satisfied that the requirements for service of the bankruptcy notice upon the respondent complied with the relevant provisions of the Electronic Transactions Act 1999 (Cth) as at 22 February 2024.
2. Pursuant to the concession made by Counsel for the applicant concerning the invalidity of any sequestration order made consequent upon improper service of a bankruptcy notice, the sequestration order made by Registrar Schmidt on 28 August 2024 is accordingly set aside.
3. And it is so ordered.
4. In the light of the reasons of the Court given for the setting aside of the sequestration order, it is unnecessary to deal with the other issues raised in argument.
5. The Court will hear the parties as to costs.

I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Egan.

[1] Annexure 6 to the affidavit of the respondent filed on 18 September 2024.

[3] Paragraphs [9] - [23] inclusive of the Consolidated Written Submissions filed on behalf of the respondent

[5] Owen v Sandhu [2024] FCA 198 at [32] per Feutrill J.

[7] Paragraph 10 of Applicant's Consolidated Written Submissions filed on 28 January 2026.

[8] See p. 10 of Annexure 1 to the respondent's affidavit filed on 18 September 2024.

[9] See p. 1 of Annexure 1 to the respondent's affidavit filed on 18 September 2024.

[10] See p. 50 of Annexure 7 to the respondent's affidavit filed on 18 September 2024.

[11] See p. 42 of Annexure SLR-1 to the affidavit of Ms Robins filed on 23 May 2024.