Philip Ruddock (Berowra, Liberal Party, Attorney-General) Share this | Link to this | Hansard source

by leave—I move:

(1)    Schedule 1, item 6, page 3 (line 31) to page 4 (line 5), omit the item, substitute:

6  At the end of subsection 120(1)

Add:

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

(2)    Schedule 1, item 9, page 4 (lines 31 and 32), omit the item.

(3)    Schedule 1, item 11, page 5 (lines 6 and 7), omit the item, substitute:

11  At the end of subsection 121(1)

Add:

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

(4)    Schedule 1, item 14, page 5 (lines 22 and 23), omit the item.

(5)    Schedule 1, page 5 (after line 29), after item 15, insert:

15A  After section 121

Insert:

121A  Transactions where consideration given to a third party

        (1)    This section applies if:

             (a)    a person who later becomes a bankrupt (the transferor) transfers property to another person (the transferee); and

             (b)    the transferee gives some or all of the consideration for the transfer to a person (a third party) other than the transferor.

        (2)    Sections 120 and 121 apply as if the giving of the consideration to the third party were a transfer by the transferor of the property constituting the consideration.

        (3)    If the giving of the consideration to the third party is void against the trustee in the transferor’s bankruptcy under section 120 or 121, the trustee has the same rights to recover the property constituting the consideration as the trustee would have if the giving of the consideration had actually been a transfer by the transferor of the property constituting the consideration.

These government amendments remove items 6, 9, 11 and 14 from the Bankruptcy Legislation Amendment (Anti-avoidance) Bill 2005. The items sought to clarify the meaning of ‘consideration’ in sections 120 and 121 of the Bankruptcy Act to ensure that the trustee could recover loss to the bankrupt estate resulting from consideration being diverted away from the estate in the period leading up to the bankruptcy. The government proposes to remove these items because their effect would be that the trustee may be able to recover property from an arms-length transferee who has paidfull market value consideration to a third party for the transfer.

These amendments also replace items 6, 9, 11 and 14 with amendments that would allow for the application of the provisions in sections 120 and 121 of the movement of consideration from a transferee to a third party. These new amendments would deem that movement of consideration to be a ‘transfer’ for the purposes of sections 120 and 121. This would mean that, in a situation where a transferee passes on market value consideration to a third party, and the third party fails to provide market value consideration to the bankrupt, the trustee would be able to recover for the bankrupt estate the consideration held by the third party. As is currently the case in relation to sections 120 and 121, the trustee would be obliged to refund to the third party—that is, the transferee for these purposes—any consideration given for a transfer that is void against the trustee.

I note that the honourable member for Gellibrand was aware of those amendments, referred to them in her speech in the second reading debate and indicated her support for them. I table an explanatory memorandum.

Question agreed to.

Bill, as amended, agreed to.

Ordered that this bill be reported to the House with an amendment.