Beau Hartnett Federal Court case: day three hearing into “contrived” personal insolvency agreement

A decision is expected within weeks on whether a disgraced ex-lawyer will be bankrupted in a landmark Federal Court case. Read what happened in the hearing’s final day:

A decision is expected within weeks on a landmark Federal Court case examining how a disgraced ex-lawyer was able to avoid bankruptcy – and the bulk of his debts – using a contentious insolvency agreement.

Unregistered Gold Coast solicitor Beau Timothy John Hartnett faced a three-day Federal Court hearing brought by the Inspector-General in Bankruptcy, which is seeking to have his Personal Insolvency Agreement (PIA) set aside.

It is the first time the Inspector-General has brought this kind of action under the Bankruptcy Act 1966.

One of the creditors, pensioner Anthony Robert Bell, has filed a cross-claim in the matter, seeking to bankrupt Mr Hartnett and appoint a trustee if the agreement is dumped.

The hearing, before Justice Kylie Downes, heard creditors had been “contrived” for the sole purpose of having the PIA voted through, and that Mr Hartnett’s financial status needed more thorough investigation by a bankruptcy trustee.

Under the agreement, creditors were paid less than three cents of every dollar he owed.

Gold Coast lawyer Beau Hartnett, with his barrister Richard Cowen, leaves the Federal Court where he attending a hearing into his personal insolvency. Picture: NewsWire / John Gass

Mr Bell’s barrister Sam Sykes spoke about the circumstances which saw Mr Hartnett owe his client more than $580,000.

“It dates back to approximately 2013, where Mr Bell’s mother died, leaving under her will a piece of property in Ballina, secured by a $30,000 mortgage,” he said.

“Mr Hartnett acted for the mortgagee to recover that $30,000 and over the course of an approximately two-year period, charged the mortgagee $288,601.

“That money was, in effect, taken from the sale proceeds.”

Mr Hartnett then spent years in court trying to avoid repaying the money before declaring insolvency.

Mr Sykes drew the court’s attention to the judgments in those cases “where words such as ‘exorbitant’ and ‘debasing the legal profession’ were used by the court”.

Mr Sykes said Mr Hartnett was already the subject of separate bankruptcy action from January 2024 – before he entered the personal insolvency process – so had committed two “acts of bankruptcy”.

He said there was a “public interest” in Mr Hartnett being bankrupted, given the circumstances of how he came to owe the money to Mr Bell.

Julianne Jacques KC, for the Inspector-General, said the agreement was “a contrived PIA” because Mr Hartnett had put creditors in place for the express purpose of voting in favour of it.

Ms Jacques said the “friendly creditors” including Walsh Accountants, MPB Investments; and the McCallum-Henry Family Trust, received less than $40 each under the agreement.

“These numbers beg the question as to why did they bother (to submit creditor claims), if not to assist Mr Hartnett?,” she said.

Barrister Sam Sykes.

Dr Julianne Jacques KC

The court heard the largest debt in the insolvency – the $3.7m owed by him to his wife’s Hartnett Services Trust – had not been sufficiently investigated.

Ms Jacques said entities related to Mr Hartnett owned properties with a conservative value of $11m and would also be earning rent.

Barrister Richard Cowen for Mr Hartnett described the case against his client as “generalistic”.

“The problem with this whole case is there is no specificity – it’s all could be, should be might have,” he said.

Mr Cowen said insolvency trustee Anne Meagher had “looked at (Mr Hartnett’s) affairs, she’s experienced and she says there’s nothing to see here”.

“There’s now been another … investigation using the personnel of this court … the offices of the Inspector-General and the Australian Government Solicitor trawling over these things, and the best they can come up with is … ‘further investigation one day might show something’.”

Mr Cowen said many of the transactions referred to by the Inspector-General’s team, were made more than a decade ago and “Mr Hartnett had never heard of Mr Bell in 2013”.

Mr Cowen said Mr Hartnett would be “disadvantaged” if the PIA was set aside and the prospects of a bankruptcy reaping more funds for creditors at this point was “vanishingly small”.

The court action against Mr Hartnett, as well as his insolvency trustees Anne Meagher and Adam Kersey of SV Partners, came after Gold Coast Bulletin questions to the bankruptcy watchdog.

Justice Downes has reserved her decision in the case.

Originally published as Beau Hartnett Federal Court case: day three hearing into “contrived” personal insolvency agreement