In Official Trustee in Bankruptcy & Galanis and Anor [2014] FamCA 832 the Family Court of Australia held that the Official Trustee in Bankruptcy is a body corporate and not a government body, and given that it is “no more than a statutory trustee” it has no standing to apply to set aside a financial agreement made between a bankrupt and his or her spouse on the dissolution of their relationship.

In Galanis the Official Trustee had sought to set aside a financial agreement between a discharged bankrupt and his wife so that the proceeds of the sale of a property dealt with in the financial agreement could be applied towards payment of the former bankrupt’s creditors.  In order to make such an application, the party bringing the action must be, inter alia, a creditor or a government body acting in the interests of a creditor .  The representatives of the Official Trustee conceded that the latter was the only basis on which the Official Trustee could have standing to bring the proceedings.

The Court declined to make the order and, in fact, did not hear the application as it was held that the Official Trustee was neither a creditor or a government body acting in the interests of a creditor and accordingly had no standing to make the application.  It was held that nothing in the Bankruptcy Act 1966 (Cth) gave rise to a conclusion that the Official Trustee was a government body.

Interestingly, there is no mention of whether there was a caveat registered by the Official Trustee over the former bankrupt’s interest in the property in question or whether unpaid fees of the Official Trustee in carrying out its duties would have resulted in the Official Trustee being identified as a creditor (and as a result having standing to make the substantive application).

For more information on bankruptcy litigation contact Angelina Kozary.