Mackay(Trustee), In the Matter Of the Bankrupt Estate OfPhillips

This matter concerned an application by the trustee in bankruptcy, Mr. Mackay, for directions from the court regarding the distribution of assets from the bankrupt estate of Mr. Phillips. The dispute arose from competing claims over certain funds held by the trustee, specifically concerning the application of section 116(2)(a) of the *Bankruptcy Act 1966* (Cth) and the interpretation of a deed of settlement. The application was heard by Judge Dowdy in the Federal Court of Australia.

The primary legal issues before the court were whether certain funds, which were the subject of a deed of settlement entered into prior to the bankruptcy, constituted property divisible amongst the bankrupt's creditors under the *Bankruptcy Act 1966* (Cth), or if they were protected from distribution by the provisions of section 116(2)(a) of that Act. This involved determining the nature of the funds and the effect of the deed of settlement in the context of bankruptcy law.

Judge Dowdy reasoned that the funds in question were not "property divisible amongst his creditors" within the meaning of the *Bankruptcy Act 1966* (Cth). His Honour found that the deed of settlement had effectively created a trust over those funds for the benefit of specific beneficiaries, thereby removing them from the general property of the bankrupt. Consequently, the funds were not available for distribution to the creditors of the bankrupt estate. The court ordered that the trustee was not entitled to distribute the funds in question to the creditors of the bankrupt estate.