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Regulatory Compliance | TRUSTEES’ RIGHTS TO ...TRUSTEES’ RIGHTS TO VOID TRANSFER OF PROPERTYTotal Word Count: 429 Author Rating: NA  Rate this article
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Transfers of property which occur post-bankruptcy may not attract the avoidance provisions of the Bankruptcy Act 1996 (Cth) (the “Act”). The decision of the Federal Court in Trustees of the Property of Camm v Linke Nominees Pty Ltd [2010] FCA 1148 (Camm v Linke), scrutinizes the rights of Trustees’ in avoiding a transfer if it is anticipated to defeat creditors.
OVERVIEW
Transfers of property which occur post-bankruptcy may not attract the avoidance provisions of the Bankruptcy Act 1996 (Cth) (the “Act”). The decision of the Federal Court in Trustees of the Property of Camm v Linke Nominees Pty Ltd [2010] FCA 1148 (Camm v Linke), scrutinizes the rights of Trustees’ in avoiding a transfer if it is anticipated to defeat creditors. FACTS A contract for sale of land was entered into by Camm and Linke in 1995; subsequently a sequestration order was made against Camm. The contract was settled by the trustees’ of Camm’s bankrupt estate and Camm was discharged from the bankruptcy. However, he was made bankrupt again in 2003. The trustees’ of Camm’s second bankrupt estate acquired substantial evidence that proposed that the 1995 transfer was effected deliberately to defeat Camm’s creditors. On this ground, the Trustees’ of the second bankrupt estate sought to void the transfer under Section 121 of the Act as the transfer was anticipated to defeat creditors. SECTION 121 Transfer of property can be made void under this Section only if it is established that the transfer was made prior to the bankruptcy. The Trustees’ of the second bankrupt estate pleaded for Section 121 to be made available as the transfer was made before Camm’s bankruptcy and also before the confiscation order. However, Linke proved that the transfer occurred at the time of lodging and registering with the Land Title Office and post the sequestration order. DECISION The Federal Court accepting Linke’s arguments held that regardless of when the transfer occurred, at the time of lodging the documents or registering - both occurred post sequestration, i.e. after Camm’s bankruptcy. Section 121 of the Act could not be invoked, although the Trustees’ of the second bankrupt estate had substantial evidence as the transfer had occurred post-bankruptcy. LESSONS A transfer cannot be declared void if it has been lodged and registered with the consent of the Trustee and had occurred post bankruptcy, even if new evidence proposes that the transfer was ill intended. It is important for Trustees to carry out due diligence before they come across any situation where the bankrupt has entered into a contract of sale before the appointment of such Trustees. This will help ascertain whether such contracts are in the interests of the creditors. ArticleSource: ArticlesAlley.com
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