Gleeson as trustee of the Property of Saker (A Bankrupt) v Saker (A Bankrupt) (No.2)

This matter concerned an application by the trustee in bankruptcy of the property of Mr Saker for directions regarding the distribution of certain funds. The dispute arose between the trustee and Mr Saker's former wife, also a bankrupt, concerning the entitlement to proceeds from the sale of a property held by them as joint tenants. The application was heard by Judge Street in the Supreme Court of New South Wales.

The primary legal issue before the Court was whether the proceeds of the sale of the jointly owned property, which had been realised after both parties were declared bankrupt, should be treated as divisible property of the respective bankrupt estates, or if the former wife had a claim to a greater share of those proceeds than her notional one-half interest. This involved considering the effect of the bankruptcy on the beneficial interests in the jointly held property and the application of the principles of survivorship and severance of joint tenancies in the context of bankruptcy.

Judge Street reasoned that upon the bankruptcy of a joint tenant, their beneficial interest in the jointly held property is severed, and the property is thereafter held by the solvent tenant (or the trustee of the bankrupt tenant's estate) and the other tenant (or their trustee) as tenants in common. In this instance, the bankruptcy of both Mr Saker and his former wife had the effect of severing the joint tenancy. Consequently, the proceeds of the sale were to be divided equally between the respective trustees as tenants in common, reflecting their severed beneficial interests. The principle of survivorship, which would ordinarily pass the entire property to the surviving joint tenant upon the death of one, was displaced by the bankruptcy.

The Court ordered that the net proceeds of the sale of the property be divided equally between the trustee of Mr Saker's bankrupt estate and the trustee of Mrs Saker's bankrupt estate.