Bankrupt Lion Property co-founder loses bid to overturn default judgment

The Supreme Court of Victoria has dismissed a bid by John Sader, a co-founder, former director and defendant in litigation arising from investments in the Lion Property Group, to set aside default judgment and damages orders entered against him, finding his subsequent bankruptcy left him without standing to pursue the application.

The underlying proceeding was brought by 28 investors against Lion Property Group and a number of related companies and individuals over investments in property development projects promoted or managed by the group. Lion Property Group was placed into provisional liquidation on 2 July 2025, with John Lindholm and Emily Seeckts of KPMG appointed as provisional liquidators, and later liquidation on 8 August 2025, with the provisional liquidators taking over as liquidators. The plaintiffs were a group of investors who sought winding-up orders following significant concerns raised by Mr Lindholm and Matthew Hutton of McGrathNicol, who were previously appointed as independent accountants, and later confirmed by the liquidators. The investigations found that the group raised about $122 million from roughly 600 investors across 18 property developments, while pooling and diverting funds between projects and related parties and using newer investor contributions to repay earlier investors, raising concerns of a Ponzi-style operation.

The Court had granted the investors leave in July 2025 to enter judgment in default of defence against Mr Sader and another defendant. The investors later sought an assessment of damages, which was argued on 13 March 2026. After the Court identified that default judgment had not yet formally been entered, the matter was regularised and judgment was entered against Mr Sader on 17 March, with damages assessed later that day.

The timing of Mr Sader’s bankruptcy became central to his application. He presented a debtor’s petition on 10 March 2026, three days before the initial damages hearing, but the Official Receiver did not accept the petition until 18 March, one day after the default judgment and damages orders were made. Andrew Yeo of Pitcher Partners was subsequently appointed trustee of Mr Sader’s bankrupt estate.

Mr Sader argued that the judgment was irregular, that he had not received a proper opportunity to be heard and that the Court should exercise its discretion to set the orders aside. He also argued that he retained standing because the application concerned his personal right to procedural fairness rather than property vested in his bankruptcy trustee.

The investors countered that Mr Sader lacked standing because he was an undischarged bankrupt and that any right to challenge the judgment belonged to his trustee. They also argued that there was no irregularity in the entry of judgment and that Mr Sader had been given sufficient opportunity to make submissions on damages.

Associate Justice Fary treated standing as a threshold issue. The Court found that Mr Sader became bankrupt at the first instant of 18 March 2026, when his debtor’s petition was accepted by the Official Receiver. The default judgment and damages assessment therefore occurred before the date of bankruptcy.

Mr Sader also relied on the Bankruptcy Act’s doctrine of relation back, arguing that his bankruptcy should be treated as having commenced on 10 March, when he presented his petition, and that this rendered the judgment process defective. The Court rejected that argument.

Associate Justice Fary held that relation back operates for specific bankruptcy purposes, particularly the vesting of divisible property, but does not retrospectively trigger the statutory stay on creditor proceedings. Section 58(3) of the Bankruptcy Act applies only after a debtor has become bankrupt, which in Mr Sader’s case occurred on 18 March. It therefore did not prevent the investors from obtaining judgment and damages orders on 17 March.

The Court then applied the High Court’s decision in Cummings v Claremont Petroleum NL, which held that a bankrupt generally lacks a sufficient financial interest to appeal from a judgment creating or evidencing a provable debt. Once bankruptcy occurs, liability for provable debts is dealt with through the bankruptcy regime rather than by the bankrupt personally.

Associate Justice Fary found that the debts embodied in the default judgment and damages assessment were provable debts and that Mr Sader therefore had no financial interest sufficient to give him standing to set the orders aside. His summons was consequently incompetent.

Mr Sader had argued that the claims might survive his eventual discharge because the Bankruptcy Act preserves debts incurred by fraud or fraudulent breach of trust. The Court noted, however, that the investors’ pleading alleged matters including trustee-company liabilities, misleading and deceptive conduct and accessory liability, but did not allege that Mr Sader’s liability had been incurred by means of fraud or fraudulent breach of trust.

Because Mr Sader had not established an arguable basis that the judgment debts fell within the fraud exception, the Court found he could not overcome the standing objection. His summons was dismissed, with any costs application to be dealt with separately.

Read the decision here.

Katherine Wangmann of the Victorian Bar and Peter G Richards Lawyers represented the plaintiffs.