Bankruptcy Act 1966

PART VI - ADMINISTRATION OF PROPERTY  

Division 3 - Property available for payment of debts  

Subdivision A - General  

SECTION 121   TRANSFERS TO DEFEAT CREDITORS  
Transfers that are void

121(1)    
A transfer of property by a person who later becomes a bankrupt (the transferor ) to another person (the transferee ) is void against the trustee in the transferor ' s bankruptcy if:

(a)    the property would probably have become part of the transferor ' s estate or would probably have been available to creditors if the property had not been transferred; and

(b)    the transferor ' s main purpose in making the transfer was:

(i) to prevent the transferred property from becoming divisible among the transferor ' s creditors; or

(ii) to hinder or delay the process of making property available for division among the transferor ' s creditors.

Note:

For the application of this section where consideration is given to a third party rather than the transferor, see section 121A .

Showing the transferor ' s main purpose in making a transfer

121(2)    
The transferor ' s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.

Other ways of showing the transferor ' s main purpose in making a transfer

121(3)    
Subsection (2) does not limit the ways of establishing the transferor ' s main purpose in making a transfer.

121(4)   Transfer not void if transferee acted in good faith.  

Despite subsection (1) , a transfer of property is not void against the trustee if:

(a)    the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and

(b)    

the transferee did not know, and could not reasonably have inferred, that the transferor ' s main purpose in making the transfer was the purpose described in paragraph (1)(b) ; and

(c)    the transferee could not reasonably have inferred that, at the time of the transfer, the transferor was, or was about to become, insolvent.

Rebuttable presumption of insolvency

121(4A)    

For the purposes of this section, a rebuttable presumption arises that the transferor was, or was about to become, insolvent at the time of the transfer if it is established that the transferor:

(a)    had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor ' s business transactions and financial position; or

(b)    having kept such books, accounts and records, has not preserved them.

Refund of consideration

121(5)    
The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee.

What is not consideration

121(6)    
For the purposes of subsections (4) and (5) , the following have no value as consideration:

(a)    the fact that the transferee is related to the transferor;

(b)    

if the transferee is the spouse or de facto partner of the transferor - the transferee making a deed in favour of the transferor;

(c)    

the transferee ' s promise to marry, or to become the de facto partner of, the transferor;

(d)    the transferee ' s love or affection for the transferor;

(e)    

if the transferee is the spouse, or a former spouse, of the transferor - the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975 ;

(f) if the transferee is a former de facto partner of the transferor - the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975 or the Family Court Act 1997 (WA).

Exemption of transfers of property under debt agreements

121(7)    
This section does not apply to a transfer of property under a debt agreement.

Protection of successors in title

121(8)    

This section does not affect the rights of a person who acquired property from the transferee in good faith and for at least the market value of the property.

Meaning of transfer of property and market value

121(9)    

For the purposes of this section:

(a)    

transfer of property includes a payment of money; and

(b)    a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and

(c)    the market value of property transferred is its market value at the time of the transfer.