Mollaian v Girdhani [2026] FCA 179

Federal Court of Australia | Wheatley J | 29 January 2026

Link to decision

Overview

This Federal Court decision concerns the successful annulment of a sequestration order under s 153B of the Bankruptcy Act 1966 (Cth). The case provides a clear example of how a bankruptcy may be set aside because the debtor was solvent at the time the order was made, even where the debtor did not appear at the original hearing.

Key facts

• On 2 December 2025, Cyrus Mollaian was made bankrupt pursuant to a sequestration order made in his absence in the Federal Circuit and Family Court of Australia (Division 2).
• The act of bankruptcy was the failure to comply with a bankruptcy notice by 10 September 2025. A creditor's petition was presented on 9 October 2025 by the petitioning creditor.
• Mr Mollaian deposed that he could not recall being served with the bankruptcy notice or creditor's petition, explaining that during the relevant period he was experiencing significant personal and family difficulties, including the subsequent passing of his daughter from cancer.
• On 20 January 2026, Mr Mollaian filed an urgent application for annulment, supported by approximately 400 pages of affidavit and annexures.
• Neither the original petitioning creditor nor any other known creditors opposed the annulment application.

Legal framework

The Court set out the two-stage test for annulment under s 153B:

First stage: The Court must be satisfied that the sequestration order ought not to have been made, assessed by reference to the true facts as they existed at the time the order was made. This may include facts that were not before the Court at the time but does not include facts arising afterwards.

Second stage: Even if the first stage is satisfied, the Court retains a discretion as to whether an annulment should be granted. The applicant bears a "heavy burden" in persuading the Court to exercise that discretion.

The Court's findings

Whether the sequestration order ought not to have been made

Mr Mollaian provided evidence that he and his wife jointly owned four parcels of real property, with his share having an approximate net equity value of $6 million, based on online valuations. He also estimated that his shareholdings in at least two associated entities were valued at approximately $4.4 million.

The trustees in bankruptcy estimated Mr Mollaian's recoverable assets at approximately $10.7 million.

On the basis of the evidence, the Court was satisfied that Mr Mollaian was clearly solvent at the time the sequestration order was made, and that the first requirement under s 153B was met.

Whether the Court should exercise its discretion

In considering whether to grant the annulment, the Court considered the following discretionary factors from Zaghloul v Jewellery & Gift Buying Service Pty Ltd [2020] FCA 1045, all of which favoured annulment:

• Solvency: This was established on the evidence and independently supported by the trustees' report.
• Full disclosure: Mr Mollaian provided extensive financial information, including Australian Taxation Office (ATO) notices of assessment, draft tax returns, details of four discretionary trusts, and company searches and financial statements for 10 associated entities.
• Delay: Approximately four to five weeks elapsed between Mr Mollaian becoming aware of the bankruptcy and filing the annulment application. This period included the Christmas and New Year period, and the Court was satisfied there was no unexplained delay.
• Failure to attend the original hearing: The Court accepted Mr Mollaian's explanation for his failure to appear, finding it understandable in light of his personal and family difficulties.
• Trustees' remuneration and costs: Mr Mollaian agreed to, and made provision for, payment of the trustees' remuneration, costs and disbursements, paying $95,000 into the trustees' trust account.

Outcome

The Court annulled Mr Mollaian's bankruptcy pursuant to s 153B of the Bankruptcy Act 1966 (Cth), approved the trustees' remuneration of $38,500 (inclusive of GST) and ordered that the trustees' costs of the proceeding be treated as costs in the administration of the former bankruptcy.

Key takeaways

• A bankruptcy order may be annulled where the debtor can demonstrate solvency at the time the sequestration order was made, even if those facts were not before the Court originally.
• Debtors who are made bankrupt in their absence should act promptly to obtain legal advice and compile comprehensive financial evidence.
• Full and frank disclosure of all financial affairs — including trusts, associated entities and liabilities — is essential and carries significant weight in the Court's exercise of discretion.
• Payment of all known debts and trustees' costs prior to the hearing will strongly support an annulment application.
• Personal or family circumstances may be accepted as a satisfactory explanation for failure to attend the original hearing.

This summary is prepared for general information purposes only and does not constitute legal advice. Please contact us to discuss how these principles may apply to your specific circumstances.