Official Trustee in Bankruptcy v Selig and Selig

The Official Trustee in Bankruptcy (the Trustee) sought to recover funds from Mr and Mrs Selig (the Seligs) that had been paid to them by a company, ACN 003 710 710 Pty Ltd (in liquidation) (the Company), prior to its insolvency. The Trustee alleged that these payments constituted voidable transactions under the *Corporations Act 2001* (Cth) and sought declarations that the payments were void and orders for their recovery. The matter was heard in the Federal Court of Australia.

The primary legal issue before the Court was whether the payments made by the Company to the Seligs were uncommercial transactions or unfair loans within the meaning of sections 588FB and 588FD of the *Corporations Act 2001* (Cth), respectively. The Trustee contended that these transactions had the effect of preventing the effective exercise of the Company's powers to give preference to its creditors and that the Seligs had not given fair market value for the payments received.

Judge Burnett found that the transactions were indeed uncommercial. His Honour considered the circumstances surrounding the payments, including the financial position of the Company at the time and the nature of the benefits received by the Seligs. The Court applied the principles established in cases concerning voidable transactions, focusing on whether the transactions were entered into in good faith and for valuable consideration. The Court determined that the payments were not made in good faith and that the Seligs had not provided adequate consideration, thus rendering the transactions voidable.

The Court made declarations that the payments were void and ordered the Seligs to repay the sums received to the Official Trustee in Bankruptcy.