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Smith v Trustee of the Property of Richard John Smith; Bankruptcy Case Brief

Bankruptcy case brief
In this blog post, we will be discussing the case of Kirk as trustee of the Property of Smith (a Bankrupt) v Smith [2024] FCA.

This case involves three related proceedings arising from the bankruptcy of Mr Richard John Smith and the transfers of property he made to his wife, Mrs Glenys Smith. The trustee in bankruptcy, Mr Darryl Edward Kirk, seeks to declare these transfers void under the Bankruptcy Act 1966 (Cth). Join us as we delve into the details of this intriguing case.1

      • Background facts of the case: The case involves three related proceedings arising from the bankruptcy of Mr Richard John Smith, and the transfers of property he made to his wife Mrs Glenys Smith, which the trustee in bankruptcy (Mr Darryl Edward Kirk) seeks to declare void under the Bankruptcy Act 1966 (Cth).

      • The applicant’s claim and the relevant legislation: The applicant claims that the transfers of property by Mr Smith to Mrs Smith, including the proceeds of sale of two properties in Queensland and the payments into Mrs Smith’s superannuation account, were void under sections 120, 121 and 128B of the Bankruptcy Act, as they were made with the main purpose of defeating or delaying Mr Smith’s creditors.

      • The first respondent’s defence and the relevant principles: The first respondent denies that the transfers were void, and argues that she had an equitable interest in the properties and the proceeds of sale, based on her contributions to the joint endeavour with Mr Smith and the expenses she incurred in preparing the properties for sale. She also argues that the loan agreement between her and Faloda was not a sham, and that the superannuation transfers were not challengeable under section 128B. She relies on the principle that equity will restore the parties to a joint endeavour which fails when contributions have been made in circumstances where it is not intended that the other party enjoy them.

      • The Court’s findings and orders: The Court finds that the transfers of property by Mr Smith to Mrs Smith were void under sections 120 and 121 of the Bankruptcy Act, as they were made with the intention of defeating Mr Smith’s creditors and the property would have been available to them. The Court also finds that the loan agreement was a sham and that the superannuation transfers were void under section 128B. The Court orders that the parties agree on draft dispositive orders giving effect to the findings, and that the balance of funds in Mrs Smith’s superannuation account be paid to the applicant.

    https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/single/2023/2023fca0300

    https://sladen.com.au/news/2024/3/22/sladen-snippet-kirk-superannuation-removed-no-longer-protected-from-creditors

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