Although most western legal systems have recognised for some decades the public benefit in rehabilitating failed enterprises, some countries do it better than others. To some extent, this is because of differences in local legislation (sometimes small, but with far-reaching effects), which either shapes, or is shaped by, popular or political attitudes to business failure.

Mango Boulevard Pty Ltd & Anor v Whitton & Ors [2015] FCA 1169

A bankruptcy trustee’s notice objecting to discharge on one of the special grounds specified in the Bankruptcy Act 1966 can be valid even if based on additional unstated reasons, so long as those reasons are directed to the achievement of a purpose of the law of bankruptcy.

Since the Global Financial Crisis it has been increasingly common for parties involved in property settlement disputes to be fighting over property with a net negative value or, in extreme cases, for one party to be declared bankrupt.

Despite common perception, a spouse being declared bankrupt in the middle of court proceedings for property settlement does not automatically end the proceedings or mean that the bankrupt’s assets are put out of reach of the other spouse in a property settlement.

The Bankruptcy Act 1966 (Cth) (the Act) provides a regime by which a debtor can compromise with his/her creditors outside formal bankruptcy. The provisions are found in Part X (Personal Insolvency Agreements) and Part IX (Debt Agreements) of the Act.

DEBT AGREEMENTS

In family law property settlement proceedings, if a spouse is declared bankrupt, the trustee in bankruptcy may join the proceedings in an effort to recover funds from the property pool to pay the bankrupt’s creditors.

While in theory this approach sounds sensible, it may not always be prudent for a trustee in bankruptcy to seek to be joined or consent to being joined. In particular, recent trends suggest that trustees are being very cautious about getting involved in proceedings between a bankrupt and their spouse.

The involvement of a trustee in bankruptcy

When a buyer’s characteristics can determine whether they are misled about the features of a property

Orchid Avenue Pty Ltd v Hingston & Anor [2015] QSC 42 per McMurdo J

This case highlights the importance of buyers making their own enquiries when purchasing properties for reasons that relate to features external to the property, such as ocean views. 

Di Cioccio v Official Trustee in Bankruptcy (as Trustee of the Bankrupt Estate of Di Cioccio) [2015] FCAFC 30

Whether inconsistency between Div 4B of Pt VI, s 58(1)(b) in Div 4 of Pt IV and s 116 of Pt VI of the Bankruptcy Act 1966 (Cth)

An appeal from the decision of Di Cioccio v Official Trustee in Bankruptcy [2014] FCA 782.

THE PERILS OF AMBIGUITY IN BANKRUPTCY NOTICES

The Bankruptcy Act ('the Act') is prescriptive as to the form and content of bankruptcy notices. Courts have often observed that close observance of the rules is necessary in light of the serious consequences faced by debtors upon bankruptcy and failure to do so may result in the notices being rendered invalid.

BACKGROUND

In Condon (Trustee), in the matter of Rayhill (Bankrupt) v Truthful Endeavour Pty Ltd [2015] FCA 7, Condon, as trustee of the bankrupt estate of Colleen Ann Rayhill (known as Colleen Lewis), sought a declaration that various payments made in respect of a property (the Property) rendered Lewis a creditor of the Kenthurst Investment Trust (KI Trust). 

In brief - Courts identify three circumstances for ordering priority repayments