McVey (Bankrupt) [2012] FCA 455

In this case a husband and wife jointly owned the family home. The husband went bankrupt and the trustee disclaimed any interest in the property on the grounds that it was “burdened with onerous covenants and/or is unsaleable or is not readily saleable.” By operation the State of NSW then became vested with the husband’s interest.

The wife continued to make the payments to ANZ who held the first mortgage. The wife sought an order under s 133(9) of the Bankruptcy Act 1966 (Cth) (the Act) which read:

The Court may, on application by a person either claiming an interest in disclaimed property, make an order, as the Court considers just and equitable, for the vesting of the property in a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested in.

The wife submitted that it was just and equitable that the disclaimed property be vested in her because:

  1. she is now solely liable under the mortgage;
  2. the property is her home and the only significant asset and she contributed to the purchase price; and
  3. since her husband was declared bankrupt, she has been meeting all of the obligations under the mortgage and intends to continue to do so.
  4. The State of New South Wales and the Bank have each consented.

The court agreed and made the order.

Click here to read the full judgment

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