Official Trustee in Bankruptcy as trustee of the Property of Cholkun Pak, a Bankrupt v Pak

The Official Trustee in Bankruptcy, as trustee of the property of Cholkun Pak, a bankrupt, brought proceedings against Mr Pak. The dispute concerned the validity of certain transfers of property from Mr Pak to his wife, which the Official Trustee sought to set aside as voidable transactions under section 120 of the *Bankruptcy Act 1966* (Cth). The matter was heard by Emmett J in the Federal Court of Australia.

The primary legal issue before the court was whether the transfers of property from Mr Pak to his wife were voidable preferences or transfers for an inadequate consideration, thereby attracting the operation of section 120 of the *Bankruptcy Act*. Specifically, the court had to determine if the transfers were made for less than the value of the consideration provided by Mr Pak, and if they were made at a time when Mr Pak was unable to pay his debts as they became due.

Emmett J applied the principles of section 120 of the *Bankruptcy Act*, which allows a trustee to avoid transactions where a bankrupt has divested themselves of property for less than its true value, or where the transaction has the effect of preferring one creditor over others. His Honour considered the evidence regarding the value of the properties transferred and the nature of the consideration provided by Mrs Pak. The court found that the transfers were made for inadequate consideration and that Mr Pak was insolvent at the time of the transfers.

Consequently, Emmett J made orders setting aside the transfers of property from Mr Pak to his wife as voidable transactions under section 120 of the *Bankruptcy Act*.