Gamble as Trustee of the Property of King, a Bankrupt v King

The Full Court of the Federal Court of Australia heard an appeal concerning a dispute between the trustee in bankruptcy of Mr. King and Mr. King himself. The trustee sought to recover certain property, specifically a half-interest in a property at 14 Willow Creek Road, Dunsborough, Western Australia, which had been transferred to Mr. King's wife shortly before his bankruptcy. The core of the dispute revolved around whether this transfer constituted an alienation of property that was voidable by the trustee under the *Bankruptcy Act 1966* (Cth).

The Full Court was required to determine whether the transfer of the half-interest in the Dunsborough property to Mrs. King was an "uncommercial transaction" or a "disposition of property for wholly or partly inadequate consideration" within the meaning of s 120 of the *Bankruptcy Act*. Specifically, the court had to consider whether the consideration provided by Mrs. King for the transfer was inadequate, and if so, whether the transaction was uncommercial, thereby rendering it voidable by the trustee.

Lucev J, delivering the judgment of the Full Court, applied the principles established in cases such as *Official Trustee in Bankruptcy v Schultz* and *Official Trustee in Bankruptcy v Lymberis*. His Honour found that the consideration provided by Mrs. King, which was primarily her undertaking to pay off a joint debt secured by a mortgage over the property, was indeed inadequate when compared to the value of the half-interest transferred. The court reasoned that the transaction was uncommercial because it was not one that a solvent person acting prudently would enter into, given the significant disparity between the value received and the value given. The trustee was therefore entitled to have the transfer set aside.

The appeal was allowed, and the orders of the primary judge were set aside. The Full Court declared that the transfer of the half-interest in the Dunsborough property to Mrs. King was voidable by the trustee and ordered that the property be vested in the trustee.