The applicant creditor successfully resisted a bankrupt's application to annul his bankruptcy in JML Rose Pty Ltd v Jorgensen (No 3) [2025] FCA 976.

Following a Magistrates Court default judgment for unpaid legal fees, the bankrupt was served with a bankruptcy notice, committed an act of bankruptcy, and was made bankrupt on a creditor's petition. After the sequestration order was made - and after an unsuccessful stay application and an unsuccessful review before Logan J - the Magistrates Court later set aside the default judgment on the basis the Bankrupt had a prima facie defence.

The bankrupt applied under s 153B of the Bankruptcy Act 1966 (Cth) to have his bankruptcy annulled, contending that the bankruptcy could not stand once the judgment debt had been set aside.

To succeed on an application to annul a bankruptcy under s 153B, a debtor must:

a) satisfy the Court that the sequestration order "ought not to have been made," judged against the true facts as they existed at the time it was made; and

b) persuade the Court that the discretion to annul should be exercised in their favour.

The second element usually means proving solvency, giving full and frank disclosure of one's financial affairs, and putting forward a proposal for payment of the trustee's fees.

The bankrupt did none of this. The Court found that, even putting the default judgment to one side, an underlying debt to the creditor was above the statutory minimum, and a supporting creditor was nonetheless ready to be substituted. The discretion to annul had not been enlivened, and even if it had, the bankrupt had not established his solvency, made full disclosure of his financial affairs, or proposed any payment of the trustee's fees.

See the reasons for judgment.