Re Finney, Raymond Frank Ex parte Official Trustee In Bankruptcy v Finney, Raymond Frank

In this case, the Official Trustee in Bankruptcy applied to the Federal Court for a declaration that a payment of $250,000 by the bankrupt to his son was a voidable settlement. The court was required to determine whether the payment constituted a settlement of property under section 120(2) of the Bankruptcy Act 1966, and if so, whether the bankrupt was able to pay all his debts without the aid of the money comprised in the settlement. The court also had to consider whether the payment could be characterised as a trust or guarantee. The court found that the payment was a settlement of property within the meaning of section 120(2) of the Bankruptcy Act 1966. It was a deliberate disposition of a capital fund, even though it was not retained in its original form. The bankrupt had not established that at the time of making the settlement, he was able to pay all his debts without the aid of the money comprised in the settlement. The bankrupt had a contingent liability for additional income tax and penalties, as well as a reasonable possibility of having to meet a significant damages claim. The court ordered that the payment be returned to the trustee, plus interest, and that the respondents pay the trustee's costs.