The Trustee of the Property of Currey (A Bankrupt) v Currey

The Trustee of the Property of Currey (a Bankrupt) brought proceedings against Mr. Currey concerning the bankrupt's entitlement to certain property. The dispute centred on whether the bankrupt's interest in a discretionary trust was divisible amongst his creditors under the *Bankruptcy Act 1966* (Cth). Jarrett J of the Federal Court of Australia was required to determine the nature of the bankrupt's interest in the trust and its susceptibility to the bankruptcy process.

The primary legal issue before the Court was whether the bankrupt's potential entitlement under the discretionary trust constituted a "vested" or "contingent" interest that would pass to the trustee under section 58 of the *Bankruptcy Act 1966*. Specifically, the Court had to consider if the bankrupt's ability to receive distributions from the trust was sufficiently certain to be considered property divisible amongst his creditors, or if it remained too remote and dependent on the trustees' discretion.

Jarrett J reasoned that a beneficiary's interest in a discretionary trust, where distributions are entirely at the trustees' discretion, does not amount to a proprietary right that vests in the trustee in bankruptcy. The Court applied the principle that for property to be divisible amongst creditors, it must be a present, ascertainable right, not merely a hope or expectation of receiving a benefit. The bankrupt's interest was characterised as a mere expectancy, contingent upon the exercise of the trustees' discretion in his favour, and therefore not property that passed to the trustee under section 58 of the Act. The Court also considered the application of section 116 of the Act, which protects certain property from seizure by the trustee, but found it did not apply to the bankrupt's interest in the discretionary trust.

The Court ordered that the bankrupt's claim to the property in question was not divisible amongst his creditors.