Lane (Trustee), in the matter of Lee (Bankrupt) v Commissioner of Taxation (No 3) [2018] FCA 1572

Lane (Trustee), in the matter of Lee (Bankrupt) v Commissioner of Taxation (No 3) [2018] FCA 1572

Funds recovered by Bankruptcy Trustees after avoidance of a preferential payment made by a trustee exercising the right of exoneration remain subject to trust obligations and may only be used to discharge trust debts; they do not become available to general creditors of the bankrupt estate.

Parties
First Applicant: Morgan Gerard James Lane; Second Applicant: Rajendra Kumar Khatri; First Respondent: Commissioner of Taxation; Second Respondent: Janet May Lee; Third Respondent: Westpac Banking Corporation; Fourth Respondent: Bevmont Pty Ltd as Trustee for the Lee Family Trust; Fifth Respondent: Warwick Gordon Lee
Jurisdiction
Australia
Judgment Date
19 October 2018
Procedural Posture
Application / Post Judgment (supplementary Reasons)
Outcome
Declaration of principles; parties directed to bring in Minutes of Orders reflecting conclusions; costs to be determined or relisted for argument if not agreed.
Legal Topics
Property Available to Meet Creditors' Claims, Trustee's Right of Exoneration, Avoidance of Preference Payments, Subrogation of Trust Creditors, Characterisation of Funds Recovered
Bankruptcy and Insolvency Trusts Property Available to Meet Creditors' Claims Trustee's Right of Exoneration Avoidance of Preference Payments Subrogation of Trust Creditors Characterisation of Funds Recovered

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Parties

Morgan Gerard James Lane

First Applicant

Rajendra Kumar Khatri

Second Applicant

Commissioner of Taxation

First Respondent

Janet May Lee

Second Respondent

Westpac Banking Corporation

Third Respondent

Bevmont Pty Ltd as Trustee for the Lee Family Trust

Fourth Respondent

Warwick Gordon Lee

Fifth Respondent

Procedural Posture

Application / Post Judgment (supplementary Reasons)

Legal Issues

  1. 1 Whether funds recovered by Bankruptcy Trustees after avoidance of preferential payment made by a trustee from trust assets are held for all creditors or trust creditors only
  2. 2 Whether the right to recover such funds is subject to trust obligations or available for general creditors

Ratio Decidendi

Funds recovered by Bankruptcy Trustees after avoidance of a preferential payment made by a trustee exercising the right of exoneration remain subject to trust obligations and may only be used to discharge trust debts; they do not become available to general creditors of the bankrupt estate.

Court Disposition

Declaration of principles; parties directed to bring in Minutes of Orders reflecting conclusions; costs to be determined or relisted for argument if not agreed.

Orders

  • The parties are to bring in Minutes of Orders reflecting the conclusions reached in these reasons and on the question of costs. If no agreement can be reached on costs, the matter is to be relisted for further argument.
  • Bankruptcy Trustees should have their costs of this issue paid by the Commissioner.