Pekar v Holden (Trustee)

Case [2019] FCA 442

FEDERAL COURT OF AUSTRALIA

Pekar v Holden (Trustee) [2019] FCA 442

File number: VID 991 of 2018
Judge: MOSHINSKY J
Date of judgment: 3 April 2019
Catchwords: BANKRUPTCY – application by former bankrupt for release of funds paid to trustee in bankruptcy pursuant to an agreement – where former bankrupt contended that his estate was free from debt and, accordingly, the funds should be released
Legislation: Bankruptcy Act 1966 (Cth), ss 82, 102, 109, 120, 121, 140, 145,153
Cases cited:

Boensch v Pascoe [2007] FCA 1977

Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52

Holden in his Capacity as Trustee of the Bankrupt Estate of Pekar v Pekar [2017] FCCA 22

Jambrecina v Official Trustee in Bankruptcy [2005] FCA 236

Pekar v Holden (Trustee) [2017] FCA 596

Pekar v Rickards Legal [2015] FCCA 2888

Pekar v Rickards Legal [2015] FCCA 217

Pekar v Rickards Legal (No 3) [2016] FCCA 2198

Pekar v Rickards Legal (No 3) [2017] FCCA 1196
Date of hearing: 15 October and 7 November 2018
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 72
Counsel for the Applicant: The Applicant appeared in person
Solicitor for the Respondent: Ms T Rothwell of Rothwell Lawyers

ORDERS

VID 991 of 2018
BETWEEN:

FIMA PEKAR

Applicant
AND:

TIMOTHY MARK SHUTTLEWORTH HOLDEN

Respondent

JUDGE:

MOSHINSKY J

DATE OF ORDER:

3 APRIL 2019

THE COURT ORDERS THAT:

1.The matter be listed for mention on a date to be fixed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

MOSHINSKY J:

Introduction

  1. This matter relates to an agreement (the Agreement) made on 27 June 2017 between the applicant, Mr Pekar, and the respondent, the trustee of Mr Pekar’s bankrupt estate (the Trustee).

  2. Mr Pekar and his wife, Mrs Pekar, had been the joint proprietors of a residential property in East St Kilda (the Property).  On 16 July 2012, Mr Pekar transferred his interest in the Property to Mrs Pekar.

  3. On 2 October 2014, a Registrar of the Federal Circuit Court of Australia made a sequestration order against the estate of Mr Pekar.  The Trustee was appointed as one of two trustees of Mr Pekar’s estate.  He was subsequently appointed as the sole trustee of Mr Pekar’s estate.

  4. On 30 April 2015, the Trustee applied to the Federal Circuit Court seeking a declaration that the transfer was void, pursuant to s 120 or 121 of the Bankruptcy Act 1966 (Cth) (the Act), and consequential orders for possession and sale of the Property.

  5. On 20 January 2017, Judge Burchardt made the orders sought by the Trustee: Holden in his Capacity as Trustee of the Bankrupt Estate of Pekar v Pekar [2017] FCCA 22.

  6. Mrs Pekar appealed the orders of the Federal Circuit Court.  On 30 May 2017, Tracey J made orders dismissing the applicant’s appeal: Pekar v Holden (Trustee) [2017] FCA 596.…

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Pekar v Holden (Trustee) [2019] FCA 442
Case
[2019] FCA 442
Decision Date

CaseChat Overview and Summary

The case of Pekar v Holden (Trustee) involved a former bankrupt, Mr Pekar, who sought the release of funds held by the trustee in bankruptcy, Mr Holden. Mr Pekar argued that his estate was free from debt and, therefore, the funds should be returned to him. The dispute was heard in the Federal Court of Australia. The primary legal issue before the court was whether the funds paid to the trustee were subject to creditors' claims even after the bankrupt's discharge under the Bankruptcy Act 1966 (Cth). Specifically, the court had to determine whether Section 153 of the Act operated to release both the bankrupt and the bankrupt's estate from debts, or whether it only discharged the bankrupt.

The court examined the statutory provisions and concluded that Section 153 operates to release the bankrupt from debts provable in insolvency, but it does not discharge the bankrupt's estate from those debts. As a result, any property vested in the trustee continues to be so vested even after the bankrupt is discharged, and it remains subject to creditors' provable and proved debts. This means that the funds in question were still available to satisfy the bankrupt's creditors. Given this interpretation of the statute, the court found that Mr Pekar's contentions were not valid, and he was not entitled to the release of the $200,000.

The court further noted that any ancillary or consequential orders sought by Mr Pekar were also not appropriate, as they depended on the invalid contentions he presented. Consequently, the court ordered that the matter be listed for a mention to address the issue of costs and any other matters that may arise. This decision underscores the principle that the discharge of a bankrupt does not affect the rights of creditors in relation to the bankrupt's estate.

Orders

Orders of the court

1. The matter be listed for mention on a date to be fixed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

Section 153 operates to release the bankrupt from debts provable in insolvency, not the bankrupt’s estate. Any property vested in the Trustee continues to be so vested even once the bankrupt is discharged, and remains subject to the creditors’ provable and proved debts.Conclusion It follows that none of Mr Pekar’s contentions is made out and Mr Pekar is not entitled to release of the $200,000 on the basis he presented at the hearing. To the extent that Mr Pekar sought additional orders that were ancillary to or consequential upon these contentions (see [18] above), for the same reasons, Mr Pekar is not entitled to those orders. For the reasons indicated above, I will list the matter for mention. The question of costs can also be addressed at the mention.

Ratio Decidendi

Legal Principle Established

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