Meletsis v Yeo in his capacity as trustee of the bankrupt estate of Karas

Meletsis v Yeo in his capacity as trustee of the bankrupt estate of Karas [2022] FCA 1389 concerned a dispute between the appellants, Meletsis and Hallmark, and the respondents, who were the assignees of the rights of a company in liquidation against Meletsis and Hallmark. The primary issues in the case were the nature of the assignment of the company's rights to the respondents, the primary judge's findings regarding the sale of property, the admission of transcripts of examinations under the Bankruptcy Act 1966 (Cth), and the availability of a tracing remedy against Hallmark in connection with the discharge of a mortgage. The case arose from the sale of property by Meletsis, who was the director of the company in liquidation, to a new company, Hallmark, at an undervalue. The respondents, as assignees of the company's rights, sought compensation and restitutionary relief against Meletsis and Hallmark.

The primary judge found that Meletsis had a dishonest and fraudulent design in selling the property, and that Hallmark was a knowing participant in this breach. The judge also found that the discharge of a mortgage held by Mr Karas, Meletsis' brother-in-law, was an alienation of property with intent to defraud creditors and void pursuant to s 172 of the Property Law Act 1958 (Vic). The tracing remedy was available against Hallmark, as the ultimate recipient of the value of the discharged mortgage. The primary judge admitted transcripts of examinations of Meletsis and others under s 81 of the Bankruptcy Act, despite the appellants' objection that the transcripts should not be admissible in proceedings brought under the general law.

The appellants appealed the primary judge's decision on 14 grounds, but the appeal was ultimately dismissed. The court found that the primary judge's findings regarding the nature of the assignment, the sale of property, and the tracing remedy were open to be made and demonstrated no error. The court also found that the primary judge correctly admitted the transcripts of examinations under s 81 of the Bankruptcy Act, despite the appellants' objection that the transcripts should not be admissible in proceedings brought under the general law. The appeal was dismissed, and the appellants were ordered to pay the respondents' costs of the appeal.