Update to statement of the Official Trustee in Bankruptcy v Kent

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The Federal Court of Australia in the case of the Official Trustee in Bankruptcy v Kent [2023] FCA 1211, made findings regarding compensation paid to a former bankrupt.

The Official Trustee sought judicial advice from the Federal Court to clarify the legal position relevant to the vesting of Australian Financial Complaints Authority (AFCA) compensation-related funds, in the knowledge it would benefit registered trustees, bankrupts and industry stakeholders.

His Honour, A/g Chief Justice Rares, found that a compensation claim via the AFCA Scheme brought by a former bankrupt (Mr Kent) is not property of the bankrupt which vests in the trustee under the Bankruptcy Act 1966. The Official Trustee carefully reviewed his Honour’s reasons and determined not to appeal the decision to the Full Court of the Federal Court.

Based on the judgment, the Official Trustee is reviewing both current and former bankrupt estate administrations involving AFCA compensation payments to confirm whether they vest in the circumstances. The Official Trustee is distributing these funds as required and has updated internal guidance and processes to assist in the administration of bankrupt estates.

Trustees should consider their course of action and are strongly encouraged to obtain independent legal advice.