Kerr as trustee of the property of Janice Mary Kehlet (a bankrupt) v Kehlet

The case of Kerr as trustee of the property of Janice Mary Kehlet (a bankrupt) v Kehlet involved the question of whether certain transfers of property were void against the trustee in bankruptcy and if the transferee must compensate the trustee for the value of the consideration given. The property in question was the matrimonial home, which was in the sole name of the bankrupt, Janice Mary Kehlet. Five years before her bankruptcy, Kehlet transferred her interest in the property to her husband, who was the respondent in this matter. The dispute centred on whether this transfer could be considered as intended to give each spouse a one-half interest in the property, irrespective of their financial contributions. Furthermore, it was questioned whether the transfer was made for less than the market value, as stipulated under section 120 of the Bankruptcy Act 1966 (Cth), and whether the transferor's primary intent was to hinder or delay the division of her property among her creditors, as outlined in section 121 of the same Act.

The court was required to determine whether the transfer of the matrimonial home was made for less than the market value and if it could be considered a voidable transaction under section 120 of the Bankruptcy Act. Additionally, the court had to examine if the primary purpose of the transfer was to prevent the property from becoming divisible among Kehlet's creditors or to hinder or delay the process, making it void under section 121. If either of these provisions applied, the court needed to decide whether the trustee in bankruptcy must compensate the transferee for the value of the consideration given.

The court found that the transfer of the matrimonial home to the husband was intended to give each spouse a one-half interest in the property. However, the transfer was made for less than the market value, rendering it voidable under section 120 of the Bankruptcy Act. Furthermore, the court determined that the primary intent of the transfer was to prevent the property from becoming divisible among Kehlet's creditors, making it void under section 121. Consequently, the trustee in bankruptcy was not required to compensate the transferee for the value of the consideration given.

The court ordered that within seven days from the date of these orders, the parties were to send by email to my associate either an agreed form of orders or their competing orders to give effect to these reasons for judgment, including as to costs. Entry of orders was to be dealt with in Rule 39.32 of the Federal Court Rules 2011.