Today, the Federal Court of Australia handed down its decision in the matter Inspector-General in Bankruptcy v Hartnett.
Her Honour Justice Downes ruled that the Personal Insolvency Agreement be set aside, and the estate of Mr Hartnett has been sequestrated, placed into bankruptcy, effective from 19 December 2024.
The Inspector-General in Bankruptcy welcomes the court’s decision.
AFSA Chief Executive and Inspector-General in Bankruptcy, Tim Beresford, said:
“This is the first time the Inspector-General had made such an application to the court under the Bankruptcy Act 1966.
“The court case centred on concerns that the terms of Mr Hartnett’s Personal Insolvency Agreement were unreasonable or not in the interests of creditors.
“This case is a clear and decisive example of intelligence-led regulation and should serve as a reminder to all system users of their legal obligations and the importance of protecting the integrity of Australia’s personal insolvency system.
“The Inspector-General is committed to pursuing people who knowingly misuse the system. Where we suspect deliberate system misuse, we will act.”
Addressing Mr Hartnett’s conduct in his Personal Insolvency Agreement, Justice Downes said in her judgment:
“The estimated return to creditors under the Personal Insolvency Agreement was the sum of $15,850, as compared to the debts covered by the Personal Insolvency Agreement in the amount of $4,450,980. That resulted in an estimated return to creditors (other than the Hartnett Service Trust) of 2.165 cents in the dollar.”
"Because of the manner in which Mr Hartnett gave his evidence under cross-examination (which gave me no confidence that his answers were correct) and because I consider that the vote in favour of the PIA was a contrived one for which he was responsible, I do not accept any evidence given by Mr Hartnett in this proceeding (whether oral or written). In short, Mr Hartnett is not a reliable witness.”
Justice Downes noted that the “circumstances call for a greater opportunity to inquire into Mr Hartnett’s affairs” and concluded that the PIA was “unreasonable and not calculated to benefit creditors generally.”
The decision is available for download from the Federal Court website.
