Macks as Trustee of the Bankrupt Estate of Lee v Lee

In the Supreme Court of New South Wales, Manousaridis J considered an application by Mr Macks, the trustee of the bankrupt estate of Ms Unju Lee, against Mr Dong Sik Lee and Ms Kyung Hee Lee. The trustee alleged that Ms Lee had transferred her interest in a property at 4-6 Tangarra Street, Croydon, New South Wales, to Mr and Ms Lee for a consideration less than its market value. The trustee sought to have this transfer declared void against him.

The central legal issues before the court were whether the transfer of the 4-6 Tangarra property was void against the trustee under section 120(1) of the *Bankruptcy Act 1966* (Cth) on the grounds that it occurred within five years prior to the act of bankruptcy and that the consideration provided was less than the market value. Alternatively, the trustee argued the transfer was void under section 121 of the Act, as it was a natural and probable consequence of the transfer that creditors would be defeated or delayed. The trustee also sought, in the further alternative, repayment of a $300,000 loan from Ms Lee to Mr and Ms Lee, and a tracing remedy in relation to the proceeds of sale of the property and any assets acquired with those proceeds.

The trustee's claims were based on the premise that Mr and Ms Lee agreed to purchase the property for $1 million in August 2012, but only paid $700,000. The remaining $300,000 was to be treated as a loan from Ms Lee, secured by a mortgage, payable on six months' notice, with interest. The sale was completed in January 2013, with the $300,000 balance remaining unpaid. The trustee contended that this transaction, occurring within five years of Ms Lee's bankruptcy in June 2014, constituted a transfer for less than market value and was intended to defeat or delay creditors. The trustee also asserted a charge over the property that attached to the proceeds of sale and any subsequent assets.