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A creditor can apply to a Federal Court for an order to make a debtor bankrupt. This application is called a creditor’s petition and if everything is in order, will lead to the Court making a sequestration order against the debtor. Normally, Registrars of the Federal Courts are the ones responsible for hearing Creditor’s Petitions.

However, did you know that registrars have no power of their own to make a sequestration order? Instead the whole system hangs upon registrars exercising delegated judicial authority, and a “Constitutional imperative” that means Judges (ie those appointed under Chapter III of the Australian Constitution) must be ready to re-hear the creditor’s petition all over again (that is, a hearing de novo)?

If you weren’t aware of this constitutional “vibe” (to quote The Castle) then you are by no means alone, as many lawyers (and indeed some judges) have learned at great cost – in time, money and confusion. Failure to engage a lawyer who understands how this Constitutional imperative works may result, as it did in one recent case, in a creditor’s petition taking over 5 years to be finally determined.

To read more about the difficulties of when the Constitutional basis for these reviews are forgotten by lawyers, and sometimes judges – follow this link:  

Or, if you would like to read an extended version published in the LexisNexis Insolvency Law Bulletin click here