Naudi and Reid as Trustees of Bankrupt Estate of Albarouki v Albarouki (No.2)

The applicants, Naudi and Reid as Trustees of the Bankrupt Estate of Albarouki, sought to have three property transfers made by the bankrupt, Albarouki, declared void. The transfers occurred within two years of the date of bankruptcy. Albarouki had purportedly entered into a binding financial agreement with the respondent, and subsequent consent orders were made in the Family Court. The applicants alleged that the Family Court was misled into making these consent orders and that the properties were transferred for no consideration.

The central legal issues before the court were whether the transfers of the three properties were void as antecedent transactions under the *Bankruptcy Act 1966* (Cth), and whether the consent orders made by the Family Court, which purportedly validated these transfers, were a nullity due to being obtained by misleading the court.

Judge Heffernan found that the transfers of the properties were void as against the trustees. His Honour determined that the purported financial agreement was not a binding agreement at the time of the transfers, and that the transfers were made for no consideration. Crucially, the court found that the Family Court had been misled by the parties, including the bankrupt, in relation to the true nature of the transactions and the financial position of the parties. Consequently, the consent orders made by the Family Court were vitiated by this misleading conduct and were therefore a nullity. The court applied the principles of bankruptcy law concerning antecedent transactions and the principles relating to the vitiation of court orders obtained by fraud or misrepresentation.

The court ordered that the transfers of the three properties were void and that the properties formed part of the bankrupt's estate.