Debtors get a rare second chance at a Personal Insolvency Agreement

Two brothers involved in a major collapse of their agricultural business have secured a rare grant of leave to execute a second authority appointing a controlling trustee, in an effort to avoid bankruptcy by way of a personal insolvency agreement. 

Background

The case of Secover Pty Ltd v Graham, in the matter of Graham [2026] FCA 260 concerns an application by Bryce Graham and Lachlan Graham (Debtors) for leave of the Court to allow a further authority to be given under s 188(1) pursuant to s 188(4) of the Bankruptcy Act 1966 (Cth) (Act).

Secover Pty Ltd (creditor) filed a creditor’s petition against the Debtors in June 2025 based on a judgment debt of $6,109,804.81. In September 2025, the Debtors executed an authority under s188 of the Act, appointing Bruce Gleeson as controlling trustee (Controlling Trustee).

A controlling trustee’s role under the Act is to assess the assets and liabilities of a debtor, and to receive a proposal from the debtor to meet creditor claims with the intention of achieving a better result for creditors by way of a personal insolvency agreement (PIA) than can be achieved in bankruptcy. A controlling trustee will review the proposal and make a recommendation to creditors to accept it or reject it based on whether it achieves the intended goal.

The Debtors put forward a PIA proposal to meet their creditor claims of over $25m. The proposal involved an upfront payment of $60,000 and then payments totalling approximately $7.3 in dividend payments from a company in which the Debtors’ father had a shareholding (such payments being funded by their fathers’ contributions, and subject to a security interest).

At the creditors’ meeting on 19 November 2025, the creditors voted on the PIA. A majority of creditors voted in favour of a resolution requiring the Debtors to execute the proposed PIA, but only 70.7% of creditors in value did so, which fell short of the required 75% by the slightest of margins.

As a result, a special resolution approving the PIA could not be passed.  The Debtors were determined to try again with a slightly revised proposal, but the Controlling Trustee was not able to reconvene another meeting or take a further vote on a new proposal under the same authority.

The authority expired after four months, but s 188(4) of the Act provides that a debtor cannot give a further authority within six months of giving an earlier one without leave of the Court.

The Debtors therefore applied for that leave.

Consideration

The Court noted that the time limits in the Act (in particular the prohibition against executing a further authority within six months of the first) exist ’to ensure that a debtor does not attempt to game the system by issuing a rolling series of authorities thereby gaining the benefit of the stay of progress of any creditor's petition.’

However, the Court acknowledged that the Act gave it a discretion to grant leave, and the exercise of that discretion would like require it to consider:

• the reason for the further authorisation
• whether the further authorisation has any utility
• whether there is any disentitling conduct on the part of the debtor or the controlling trustee, and
• the relative prejudice to the creditors and debtor in allowing the application.

In support of their application for leave, the Debtors argued that:

• they had moved promptly after the creditors’ meeting to propose a new PIA
• additional claims had been received in the intervening period that would likely change the voting numbers
• the vote at the previous meeting had been extremely close, and would likely have a different result because of the new creditor claims
• the return to creditors in a PIA scenario was significantly better than in a bankruptcy, and
• that there would be utility in conducting a further meeting in the circumstances.

The Debtors produced affidavits from creditors that expressed support for the amended PIA proposal sufficient to pass the proposal if leave were granted to try again.

The creditor, in response, argued that leave should not be granted as:

• there was little change between the original PIA and the amended PIA
• the recovery to creditors under the proposed PIA was minimal, and
• there would be double counting of debts in the vote of creditors to their disadvantage.

The Court rejected the creditor’s submissions, finding that the matters raised were for the creditors to determine between themselves, not the Court. The Court also made clear that it would not adjudicate claims between competing creditors.

Granting leave, the Court accepted that, having regard to the close vote at the original meeting and the additional creditors who had indicated support for the amended PIA, there was utility in conducting a meeting of creditors, including the new creditors who had submitted proofs of debt, and allowing them a vote. The Court acknowledged that there was no disentitling conduct by any party that would prevent the grant of leave, and that there was little prejudice in permitting a further authorisation to be given.

Key takeaways

Applications for leave to execute a second authority under s188 of the Act within six months are rare, and grants of leave are rarer still, but this case provides a framework in which the Court is prepared to consider and grant such leave. Consistent with the purpose of Part X of the Act, if there is a prospect of a better return to creditors in a PIA, and there is no disentitling conduct or prejudice that outweighs the granting of leave, then the Court is likely to be minded to let a debtor have another chance at getting their PIA proposal over the line.

Secover Pty Ltd v Graham, in the matter of Graham [2026] FCA 260