Vrsecky v Reaper & Anor

In the matter of *Vrsecky v Reaper & Anor*, Judge Burchardt of the Federal Court of Australia considered an application by a trustee in bankruptcy seeking orders for the partition sale of a property jointly owned by the bankrupt and his wife. The respondents contended that the property had been wholly or substantially bought with protected funds, as defined by section 116(3) of the *Bankruptcy Act 1966* (Cth).

The central legal issue before the Court was to determine the extent to which the bankrupt's interest in the jointly owned property was divisible property available to his trustee. This involved assessing whether payments made towards the property, particularly after the commencement of protected payments in 2007, were derived from protected funds, and how to value the bankrupt's contribution to the property in light of section 116(4) of the *Bankruptcy Act 1966* (Cth).

Judge Burchardt reasoned that to properly assess the bankrupt's divisible interest, it was necessary to ascertain the value of the property at two key points in time: May 2007, when protected payments commenced, and the current date. This valuation would allow for the calculation of the bankrupt's contribution, considering that half of the mortgage payments made from protected funds were credited to the wife. The Court also required an estimate of the outstanding mortgage balance at these respective dates.

Consequently, the Court ordered that valuations of the property be obtained as at May 2007 and currently, with the parties to agree on a valuer or have one appointed by the President of the Real Estate Institute of Victoria. The respondents were directed to provide access for the valuation. The parties were also to confer and produce an agreed estimate of the mortgage on the property at the same two dates. The matter was adjourned for further directions once these orders were complied with, with a trial date set for 18 March 2015, and costs reserved.