Yeo (Trustee) in the matter of Taib (Bankrupt) v Melnik [2025] FedCFamC2G 1486

Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051; (2008) 249 ALR 371

Macquarie Health Corp v Commissioner of Taxation [1999] FCA 1819

Mercedes Benz AG v Leiduck [1995] UKPC 31; [1996] AC 284

Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046

Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372

Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1

Re Dennis (a bankrupt) [1995] 3 All ER 171

Re Exell (1995) 62 FCR 337

Re Morris; Ex parte Donnelly (1997) 77 FCR 303; 148 ALR 349

Re Robinson; ex parte Geroff v Turner (31 March 1994)

Re Sabri [1996] FamCA 154; (1996) 137 FLR 165

Sistrom v Urh [1991] FCA 315; (1992) 40 FCR 550

Trustee of the Property of O'Halloran, in the matter of O'Halloran v O'Halloran [2002] FCA 1305

Woods v. Ulusouylu [2017] FCCA 93

Dennis SK Ong, Ong on Tracing (Federation Press, 2019)

In paragraph 36, the amount of "$40,607" has been corrected to "$40,807".

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

ANDREW REGINALD YEO AND GESS MICHAEL RAMBALDI AS TRUSTEES OF THE BANKRUPT ESTATE OF DZULKIFLEE BIN MOHAMAD TAIB

UPON NOTING that it is the Court's preference to fix the amount of any costs rather than refer the matter for taxation:

1. The Respondent file and serve an outline of submissions (not exceeding 7 pages) as to costs which includes submissions as to the basis of the calculation of any costs, an annexure as to the quantification costs and any necessary affidavit on or before 4.00pm on 3 October 2025; and
2. The Applicants file and serve an outline of submissions (not exceeding 7 pages) as to costs which includes any submissions in response the Respondent's submissions as to the basis of calculation of any costs, an annexure as to the quantification costs and any necessary affidavit on or before 4.00pm on 24 October 2025.

1. On or before 4.00pm on 31 October 2025 if either party seeks an oral hearing as to costs, that party is to notify Chambers. If any party notifies Chambers that the party requests an oral hearing an oral hearing on a half-day estimate will be set down on the first available date thereafter. Failing notification, the court will determine costs on the papers.

Note: The form of the order is subject to the entry in the Court's records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

Amended pursuant to r. 20.04(h) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) on 19 September 2025

1. On 2 March 2023 a sequestration order was made against the estate of Mr Dzulkiflee Taib. Mr Innis Cull and Mr Gess Rambaldi were appointed as trustees of the Mr Taib's bankrupt estate. Later Mr Andrew Yeo replaced Mr Cull as a trustee of Mr Taib's estate but this is not otherwise material. I refer to Mr Rambaldi and Mr Yeo as the Trustees.
2. At an earlier point in time, on 20 October 2019, Mr Melnik, the Respondent, had obtained a judgment against Mr Taib in the County Court of Victoria (CCV) for $231,945 (plus interest and costs). The judgment had remained unsatisfied for a considerable period although I infer that Mr Melnik had the comfort of a freezing order made on 8 March 2019 - before judgment - over Mr Melnik's assets. Mr Taib's relevant principal asset subject to the freezing order was real estate that Mr Taib and Ms Salem, his wife, owned in Pascoe Vale, Victoria which was also subject to a mortgage in favour of Westpac (the Property).
3. I interpolate that on 11 November 2021 Mr Taib committed an act of bankruptcy by failing to comply with a bankruptcy notice, and as a result, "the commencement date of the bankruptcy" as defined in s. 5 of the Bankruptcy Act 1966 (Cth) is taken to be 11 November 2021.
4. On 9 February 2022, the CCV varied the freezing order which put beyond doubt that Westpac - then mortgagee in possession - could sell the Property. On the variation of the freezing order the Court noted in "other matters" that "surplus proceeds" on sale (that is surplus proceeds on sale following the discharge of the mortgage) would be applied towards satisfaction of Mr Melnik's judgment.
5. On 14 December 2022 another creditor of Mr Taib, Matchbyte Consultants Pty Ltd (in liquidation) presented a creditor's petition in the Federal Court. The creditor's petition relied on an act of bankruptcy of Mr Taib on 11 November 2021: namely his failure to comply with the requirements of a bankruptcy notice served on him on 21 October 2021 (Ex T1, [12]; GMR-3).
6. On 23 February 2023 the sale of the Property settled. Mr Melnik received surplus proceeds of $81,615 or $40,807 (if, as I have found one half of the amount he received was Ms Salem's half share of the surplus proceeds) which he mixed with his own funds of $77,909 in CBA account #2495, such that there was then a balance of $159,525.
7. Between 23 February 2023 and 2 March 2023 (the date of the sequestration order against the estate of Mr Taib) Mr Melnik spent moneys from CBA account #2495, principally by reducing his own debts. Mr Melnik's evidence was that he did not know of the creditor's petition. He paid down $120,000 of his own mortgage. On 2 March 2023 Mr Melnik's account balance in CBA account #2495 had been reduced to $23,685.

1. The Trustees' action has two alternative bases.
2. First, the Trustees apply for a declaration under s.118(1)(a)(i) that Mr Melnik "received moneys totalling $81,615.24 as a result of execution by him or on his behalf against the property" of the debtor, Mr Taib. The Trustees also seek a consequential order under s. 118(1) of the Act that the Respondent pay the Applicants "$81,615.24 less any taxed costs of the execution of the property of the debtor". The resolution of this issue hinges on whether Mr Melnik did (or did not) receive moneys "as a result of execution having been issued by him.... against the property of the debtor" on 23 February 2023 (emphasis added).
3. Second, alternatively, the Trustees seek an order "under sections 115 and 116 that the respondent pay to the Applicants the sum of $40,807". As to the alternative claim, the Trustees identify the statutory sections upon which they rely as ss. 30, 115, 116 and 129 of the Act. As to this issue, I repeat "the commencement date of the bankruptcy" is 11 November 2021 (when Mr Taib failed to comply with a bankruptcy notice) but, by the date of the sequestration order, Mr Melnik had (substantially) disposed of those moneys he received on 23 February 2023 by reducing his own debts.
4. The amount of $40,807 the subject of the alternative claim is one half of the moneys Mr Melnik received on 23 February 2023. On their alternative claim, the Trustees do not seek payment of $40,807 (the other half) which was Ms Salem's money. Ms Salem was formerly a joint tenant with Mr Taib in the Property sold. The Trustees concede that they have no claim on Ms Salem's money because of Mr Taib's bankruptcy.
5. The resolution of this issue turns on a legal analysis of the facts that Mr Melnik received property - $40,807 - during the period of relation-back and disposed of that same property in good faith before the date of the sequestration order.

1. The Trustees are not entitled to the declarations or orders for payment of moneys they seek on either of their alternative claims. My reasons follow.

1. Procedurally, each party filed an outline of pre-trial submissions and supplementary submissions and, in the Trustees' case, submissions in reply (T2- T4; R3- R4).
2. Each party relied upon affidavit evidence:

(a) for the Trustees, Mr Rambaldi's affidavit made on 11 June 2024 (Ex T1); and

(b) for the Respondent, two affidavits of Mr Nikolay Melnik made on 14 July 2024 and 18 December 2024 (Ex R1 and R2).

1. The affidavit evidence of both parties was unchallenged and the trial proceeded solely by way of legal submissions.
2. At the outset of the trial, I refused the Trustees' application to rely upon a Further Amended Application to make a further claim for an order for "restitution for moneys." As this refusal assumes some significance as to issue 2 (the Trustees' claim relying on the doctrine of relation back under s. 115) I have returned to the circumstances of my refusal to permit the Trustees to make the Further Amended Application below.

ISSUE 1 - DID MR MELNIK RECEIVE MONEYS "AS A RESULT OF EXECUTION" HAVING BEEN ISSUED BY HIM AGAINST THE PROPERTY OF THE BANKRUPT?

1. On 12 September 2007, Mr Taib and Ms Salem were registered as joint proprietors of a property in Pascoe Vale, Victoria (Property) (Ex T1, [7]) subject to a Westpac mortgage (Ex T1, "GMR-1").
2. On 15 February 2019 Mr Melnik commenced a proceeding against Mr Taib in the County Court of Victoria (CCV) (Ex T1, [8]) and on 8 March 2019 the court made a freezing order over the assets of Mr Taib - including the Property (Ex T1, [8]).
3. As noted, on 28 October 2019 Mr Melnik obtained judgment against Mr Taib for a principal sum of $231,945.21 in the CCV (Ex T1, [9]).
4. On or about 23 April 2021 Westpac took possession of the Property as mortgagee in possession (Ex T2, [3g]).
5. On 27 December 2021, the Bankrupt and Ms Salem, agreed to pay the proceeds returned to them following a mortgagee sale of their Property to Mr Melnik in discharge of the judgment debt (Ex R2, [14]-[17]; Ex R3, [5]). More particularly, on 27 and 28 December 2021 there was the following exchange involving Ms Salem, Mr Melnik and Mr Melnik's solicitors. On 27 December 2021 Ms Salem wrote to Mr Melnik:

If it's not too late we consent to your client taking 100% of the proceeds of the sale of the property

(emphasis added)

1. On 28 December 2021 Mr Melnik's solicitors responded to Mr Taib and Ms Salem as follows:

We'll be writing to the bank's lawyers shortly and will assume that Mr Taib's being copied into the below email and the use of pronoun "we" by Ms Salem means that he too consents to 100% of the residue of the proceeds of sale of the above property to be directed to our client as per our proposal. Please note that both of you may be required to take active steps in the implementation of the above arrangement, such signing minutes of consent or joint letters to the court.

1. On 9 February 2022 the CCV amended the freezing order. Neither party provided the amended freezing order to me. Mr Rambaldi's evidence was that (Ex T1, [14]- [15]):

On 9 February 2022, Justice Woodward amended the freezing order in proceeding Cl-19- 00626 and made Orders in proceeding Cl-19-00626 that Westpac be permitted to sell the Property and distribute the sale proceeds towards payment of the moneys owed under its mortgage (amended Freezing Order).

Relevantly, Order 2b of the amended Freezing Order ordered Westpac (following payment of their secured debt) to distribute any of the surplus proceeds (following payment of the moneys owed under its mortgage) towards the satisfaction of the Respondent's claim under the Judgment.

1. The Trustees submitted that the freezing order was relaxed "to enable the distribution of the proceeds of sale of the property by Westpac" (Ex T2, 3(m)). It appeared to be common ground that Woodward J's intention in varying the freezing order was recorded in "other matters" on the variation of the freezing order on 9 February 2022:

"the mortgagee bank has entered into possession of the property pursuant to its powers under the mortgage and intends to sell the property. It is unable to do so with the Freezing Order in its current form. Therefore, the plaintiff [Mr Melnik] seeks an amendment to enable the sale to proceed, after which any surplus proceeds from the sale of the defendant's interest in the property will be applied towards satisfaction of the judgment."

1. Mr Melnik's evidence was that the "process of the amendment of the freezing order was initiated and procured by Westpac." (Ex R2, [22]).
2. As noted, on 14 December 2022 another creditor of Mr Taib, Matchbyte Consultants Pty Ltd (in liquidation) presented a creditor's petition in the Federal Court relying on an act of bankruptcy of Mr Taib on 11 November 2021.
3. On or about 23 February 2023 - following the settlement of the sale of the property and the discharge of Westpac's mortgage - Mr Melnik received the sum of $81,615.24 (Payment) from the proceeds of sale of the Property. Mr Rambaldi characterised the money that Mr Melnik received as received under "order 2b of the amended Freezing Order" [T1, 16(c)].

118 Execution by creditor against property of debtor who becomes a bankrupt etc.

(a) a creditor has, within 6 months before the presentation of a petition, or after the presentation of a petition, against a debtor:

(i) received moneys as a result of execution having been issued by him or her, or on his or her behalf, against property of the debtor, being moneys that are the proceeds of the sale of property of the debtor that has been sold in pursuance of the process or that were seized, or paid to avoid seizure or sale of property of the debtor, in pursuance of the process; or

(ii) received moneys as a result of the attachment by him or her, or on his or her behalf, of a debt due to the debtor; and

(b) the debtor subsequently becomes a bankrupt on, or by virtue of the presentation of, the petition;

the creditor shall pay to the trustee of the estate of the bankrupt the amount by which the amount of those moneys exceeds the taxed costs of the execution or attachment, as the case may be.

1. It was common ground that under s. 118(1)(a)(i) Mr Melnik as a creditor "received moneys" - in this case on 23 February 2023 - "after the presentation of a petition", namely the creditor's petition presented in the Federal Court or about 14 December 2022. It was also common ground that Mr Taib, the debtor, subsequently became bankrupt on, or by virtue of, the presentation of a creditor's petition under s. 118(1)(b) and the sequestration order was made on 2 March 2023.
2. The disputed issue as to the Trustees' first claim therefore devolves to whether Mr Melnik received monies "as a result of execution having been issued by him ... against property of the debtor" under s. 118(1)(a)(i) [the Trustee's position] or whether he received moneys as a result of an agreement between him and Mr Taib and Ms Salem as to how surplus proceeds would be distributed following Westpac's sale of the Property as a mortgagee in possession [Mr Melnik's position].

1. The Trustees emphasised (and I accept) that the "property was not the real estate but the fund in the hands of the Respondent. That was the whole of the money he received from Westpac following the mortgagee's sale" (Ex T2, [11]).
2. I note, however, that as to the identification of the "property of the debtor," I do not accept the Trustees' submission that all of the $81,615 was property of Mr Taib, the "debtor". The Trustees submitted that (Ex T2, [3i]):

In about September 2021 [Ms Salem] agreed that her share of the equity in the Property could be paid to Mr Melnik in satisfaction of his claim against the Bankrupt.

1. I note that on the bankruptcy of Mr Taib, the joint tenancy of Mr Taib and Ms Salem in the Property was severed and they became tenants in common (Sistrom v Urh [1991] FCA 315; (1992) 40 FCR 550, 556). The further gloss is that because of the relation-back doctrine, in this case the severing of the joint tenancy occurred as of 11 November 2021.
2. There was evidence of an agreement in December 2021 between Ms Salem Mr Taib and Mr Melnik. Under that agreement, Ms Salem agreed that Mr Melnik could take 100% of the surplus sale proceeds of the real estate. The Trustees did not prove that Ms Salem's agreement to Mr Melnik's receipt of 100% of the surplus proceeds of the Property sale transferred her half share of the Property to Mr Taib.
3. The Trustees have not proved any interest in Ms Salem's property, being one half of the moneys Mr Melnik received on 23 February 2023. Assuming Mr Melnik received moneys on 23 February 2023 as a result of execution having been issued by him against the "property of the debtor" (a matter I have ultimately decided against the Trustees for the reasons below), the amount he received was only $40,807 (excluding Ms Salem's half share of the surplus proceeds).

1. In any event, I prefer Mr Melnik's narrower interpretation of the meaning of the word "execution" in s. 118(1)(a)(i) as being confined to execution by way of a curial process. In this case, there is no relevant curial process that engages s. 118(1)(a)(i).
2. Commissioner of Taxation v Donnelly (1989) 25 FCR 432 is the leading authority on s. 118 (followed in Macquarie Health Corp v Commissioner of Taxation [1999] FCA 1819, [111] -[112]).
3. In Donnelly, the Full Court considered the meaning of "attachment" in s. 118(1)(a)(ii) rather than "execution" in s. 118(1)(a)(i). Nonetheless, as Von Doussa J observed in Donnelly there is a "coupling" of the concepts of "attachment" and "execution" in s. 118 (at 447). Von Doussa J found both concepts refer to curial processes. The structure of the section and the "coupling" of the concepts of "attachment" and "execution" tells against interpretation where interpretively those concepts would be decoupled: either both concepts refer to a curial process or both concepts have a broader meaning.
4. In Donnelly, Von Doussa J traced the history of the execution provision in the Act. His Honour said with reference to the section before it was amended by the Bankruptcy Amendment Act 1980 (at 447) that the word "attachment" does not have a meaning in the legislation "any wider than that which would encompass the usual features of garnishee proceedings, that is a process of a court in aid of the enforcement of a judgment or order". With reference to s. 118(1)(a)(ii) as it is now enacted Von Doussa J said at 448 that:

From the amended subsection, it is perhaps not as clear as it was in the repealed subsection that an attachment means a process of a court to enforce a judgment or order. However I am satisfied that this remains the meaning.

(emphasis added)

1. Von Doussa J relied upon the reference to "taxed costs of the execution or attachment" in s. 118(1) as an "important indication" that attachment had the narrow meaning of a process of a court to enforce a judgment or order (at 448). The section (von Doussa J said) operates on the basis that a creditor would have "taxed costs" of an execution - or perhaps at least the ability to have costs taxed - and the upper limit of the obligation of any payment to the trustee was to pay moneys received which exceeded the taxed costs. Taxed costs can only arise as part of a curial process.
2. Von Doussa J also drew "further support for the construction" and the narrower - curial process - meaning of "attachment" and (I say) "execution" - from s. 118's juxtaposition in the same Part VI, Division 3 of the Act alongside ss. 119 and 119A. His Honour noted that "those sections are drafted on the assumption that officers of the court will be charged with the execution of the process of attachment and the recovery of money" (at 448). Under s.119, a sheriff must "refrain... from taking any action to sell property of the debtor in pursuance of any process of execution issued by or on behalf of the creditor" if given notice in writing of a creditor's petition. In s.119 it appears that "execution" has the narrower meaning of a court process to enforce a judgment for which the Respondent contends. It is unlikely that execution would have a narrow meaning s. 119 and a wider meaning in the adjacent section of the Act s. 118. I prefer an interpretation that gives the same meaning to "execution" in s. 118 of the Act as it has in s. 119 of the Act.

1. The Trustees submitted that "execution" within the meaning of s. 118(1)(a)(i) is not confined to a single act, such as a sheriff's sale. The Trustees referred me to the ordinary meaning of "execution" as "... the process of enforcing or giving effect to a judgment..." (Concise Australian Legal Dictionary, LexisNexis Butterworths, 6th edition 2021).
2. In Re Exell (1995) 62 FCR 337 Olney J considered the meaning of "execution" in s. 40(1)(g) of the Act. Under s. 40(1)(g), a debtor commits an act of bankruptcy if he or she does not comply with the bankruptcy notice served in circumstances in which "a creditor... has obtained against the debtor a final judgment or final order being a judgment or order the execution of which has not been stayed....".
3. In Re Exell Olney J held (following Re Overseas Aviation Engineering (GB) Ltd [1963] Ch 24 at 39; Cf. Pannowitz, Re; Ex parte Wilson (1975) 38 FLR 184) held that:

'Execution' means, quite simply, the process for enforcing or giving effect to the judgment of the court; and it is 'completed' when the judgment creditor gets the money or other thing awarded to him by the judgment.

1. The Trustees also referred me to the Explanatory Memorandum to the bill which ultimately became the Bankruptcy Amendment Act 1980, which enacted the current form of s. 118. The relevant passage in the Explanatory Memorandum was as follows:

There will be now brought into the estate of the bankrupt all execution moneys received by a creditor as the result of an execution or attachment either within six months prior to the presentation of the petition or after the date of such presentation no matter when proceedings for attachment or execution were commenced (proposed s-sec 118(1) - under presents-sec 118(1) these moneys are only brought into the estate if the proceedings were commenced within six months prior to the presentation of the petition or after the date of such presentation). This will ensure that there is equity between creditors and will bring s. 118 into line with s. 119 (relating to the duties of the sheriff) which covers not only executions issued within 6 months before the presentation of the petition but also executions outside that period which are incomplete when the sheriff receives notice of the presentation of the petition. The provision will also cover payments made to avoid a seizure or sale.

1. The Explanatory Memorandum does not assist the Trustees. The relevant passage explains that (pre-amendment) moneys a creditor received as a result of execution had only to be paid to the trustee if the execution proceedings were "commenced either within 6 months before the presentation of the petition or after the date of the presentation". The section after amendment focuses not on the commencement date of the execution proceedings but on the date of the creditor's receipt of the moneys. That is, the amendment did not affect the breadth of the meaning of "execution", one way or the other. In Donnelly Hill J (in substantial agreement with von Doussa J as to the correct interpretation of "execution" in s. 118) drew the implication from the Explanatory Memorandum that "the kind of attachment to which s. 118 refers is that which is akin to execution of goods, that is to say attachment by curial order".
2. Further, bringing s.118 "into line with s. 119" - an explanation for the amendment set out in the Explanatory Memorandum - suggests that s.118 is concerned with a curial process "in line" with the curial process described in s. 119 which restrains a sheriff from taking further action where notice in writing of the creditor's position is given to a sheriff.
3. To the extent that there is any conflict between the analysis of Olney J in Exell and Von Doussa J and Hill J in Donnelly, I regard myself as bound by the analysis in Donnelly. It is a Full Court authority dealing directly with s. 118. In Exell, Olney J was dealing with "execution" in the different context of s. 40(1)(g) in Part IV of the Act. The context of the interpretive task in Exell was different: identifying whether a particular point in time had arrived, namely whether a creditor had obtained final "judgment or order the execution of which has not been stayed" rather than the breadth of the meaning of the term "execution." Although it is presumed that a word has the same meaning throughout an Act, Herzfeld notes that the presumption is "of the mildest kind" [Herzfeld, Interpretation, 2nd edition, [5.170]).
4. Going back a step further as to the history of these legislative provisions, s. 92(1) of the Bankruptcy Act 1924- 1965 - the predecessor to s. 118 - was as follows:

(1) Where a creditor has issued execution against the goods or lands of a debtor, or has attached any debt due to him, he shall not be entitled to retain the benefit of the execution or attachment against the trustee in bankruptcy unless he has completed the execution or attachment before sequestration and before notice of the presentation of any petition by or against the debtor or before notice of the commission of any available act of bankruptcy by the debtor.

1. As Pincus J said in Re Smith; ex parte Wilde v. Pad Investments Pty Ltd (1985) 11 FCR 114 at 115-116:

... prior to the 1980 amendment, inserting the present s 118, it was possible for an execution creditor, depending upon the stage to which the process of execution had progressed, to be a "secured creditor" for the purposes of the Bankruptcy Act 1966;

1. Historically, a creditor who had the benefit of a "completed" execution process was a "secured creditor" and in a relatively superior position to unsecured creditors of the bankrupt. The current form of s. 118 has moved away from that concept. Nonetheless, to the limited extent that proper regard can be had to the legislative history it tends to support an interpretation that the predecessor of s. 118 was intended to protect the position of an execution-creditor as against the trustee in bankruptcy, not to provide an alternative means (beyond that anchored either in s. 115 or the avoidance provisions in ss. 120-122) for a trustee to recover moneys on behalf of the creditors of the bankrupt estate.

Mr Melnik did not receive monies as a result of execution

1. If "execution" has the narrow meaning of a curial process or "a process of a court to enforce a judgment or order" as Von Doussa J said in Donnelly (at 448) and as I have determined following that authority the Trustees did not identify the process of "execution" by which Mr Melnik received the moneys on 23 February 2023.

1. The Trustees referred to two warrants of seizure and sale dated 31 October 2019 and 21 May 2021. If Mr Melnik had received moneys as a result of the "execution" of either of those warrants that receipt would have met the requirements of s. 118(1)(a)(i). Both warrants expired, unexecuted. I accept the Respondent's submission that neither of the warrants resulted in the sale of the property and therefore Mr Melnik did not receive the $81,615 (or $40,807) "as a result of execution" of the warrants.

1. On 1 September 2020 (or possibly 2021) (Ex T2, [3h]) Mr Melnik obtained an attachment order in the CCV which garnisheed in his favour the sum of $1,505.75 per calendar month or any other amount of rent payable in respect of the Property (Attachment Order) (Ex T1, [11]). Neither party placed any significance on the Attachment Order in the proceeding before me. If, contrary to what was argued before me, Mr Melnik had received the $40,807 under that attachment order he would have "received moneys as a result of the attachment by him ... of a debt due to the debtor" under s. 118(1)(a)(ii) and would have to pay that amount to the Trustees. As the matter was argued before me, that issue does not arise.

Receipt of monies on the relaxation of a freezing order is not receipt as a result of execution

1. The Trustees also referred to a freezing order first made on 8 March 2019 and subsequently varied on 9 February 2022. A freezing order is not a form of "execution." As the Respondent submitted, "it is an order in personam against a judgment debtor which prohibits them from freely dealing with their assets" and which "is qualitatively different from a curial process of enforcement." In Mercedes Benz AG v Leiduck [1995] UKPC 31; [1996] AC 284 at 306 (in a passage approved Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia (1998) 195 CLR 1, [35]) Lord Nicholls said of a freezing order that it does not:

... enforce the plaintiff's rights even when a judgment has ascertained that they exist, for it merely ensures that once the mechanisms of enforcement are set in motion, there is something physically available upon which they can work.

1. As to the second limb of s. 118(1)(a)(i), the Trustees have not proved that Mr Melnik received monies "paid to avoid seizure or sale of property of the debt or in pursuance of the process".
2. The Trustees' argument fails because they have not been able to point to the "mechanism of enforcement" which constitutes an execution under s. 118(1)(a)(i).
3. I will dismiss the Trustees' claim under s. 118(1) of the Act.

ISSUE 2 - SHOULD THE COURT ORDER MR MELNIK TO PAY $40,807 TO THE TRUSTEES BECAUSE OF THE COMBINED OPERATION OF SS. 30(1)(b), 58, 115, 116 AND 129(4) OF THE ACT?

1. The Trustees' alternative claim is that I should make an order that Mr Melnik pay the sum of $40,807 to the Trustees because of the combined operation of s. 58(1), ss. 115 and 116 of the Act. The Trustees also rely on the remedial provisions in ss. 30(1)(b) and 129(4) of the Act.
2. Section 58(1)(a) is as follows:

(1) Subject to this Act, where a debtor becomes a bankrupt:

(a) the property of the bankrupt.... vests forthwith in .... a registered trustee.

1. The principle of the "relation back" is set out in s. 115(1):

If a person becomes a bankrupt on a creditor's petition .... then the bankruptcy is taken to have relation back to, and to have commenced at, the time of the commission of the earliest act of bankruptcy committed by the person within the period of 6 months immediately before the date on which the creditor's petition was presented.

(1) Subject to this Act:

(a) all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy

.....

is property divisible amongst the creditors of the bankrupt

(4) If a person has in his or her possession or power any moneys or security that he or she is not by law entitled to retain as against the bankrupt or the trustee, he or she shall pay or deliver the moneys or security to the trustee.

(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.

1. In their alternative case the Trustees sought a declaration and an ancillary order for the payment of money as follows:
   1. In the alternative, a declaration under sections 115 and 116 of the Act that the interest of the Debtor in the property at 2A Lake Avenue, Pascoe Vale, Victoria, was property divisible amongst the creditors of the Debtor.
   2. An Order under sections 115 and 116 that the Respondent pay to the Applicants the sum of $40,807.62.

The refusal of permission for the Trustees to rely on a Further Amended Application

1. I have already noted that I dismissed the Trustees' oral application, earlier foreshadowed, but made at trial to rely upon a Further Amended Application. The substance of the proposed Further Amended Application was to include a further alternative claim in restitution as follows:
   1. In the alternative, an Order for restitution for moneys had and received by the Respondent in the sum of $40,807.62
2. I gave oral ex tempore reasons for my decision refusing permission to the Trustees to rely upon the Further Amended Application to which I will return.

1. Because on 11 November 2021 Mr Taib committed an act of bankruptcy by failing to comply with a bankruptcy notice it was common ground that under s. 115(1) the bankruptcy had "relation back to" 11 November 2021.
2. On 11 November 2021 Mr Taib had property, namely equity in real estate. On 23 February 2023 that property came into Mr Melnik's hands. Nothing turned on the fact that the property was converted from equity in real estate into money, in the amount of $40,807. The $40,807 was one half of $81,615 transferred to Mr Melnik's CBA account (#2495) and mixed with his own funds as surplus proceeds of the sale of the Property following the discharge of Westpac's mortgage. The other half was Ms Salem's money and can be put to one side.
3. Following the transfer on 23 February 2023, the balance in Mr Melnik's CBA a/c #2495 was $159,525 (Ex R2, [24]-[25]) comprised of $77,909 before receipt plus $81,615 received that day.
4. Between 23 February 2023 and 2 March 2023, Mr Melnik paid $135,839 out of his CBA a/c #2495 to reduce his own debts. The single largest payment was $120,000 towards the payment of his home loan, a reduction of his own mortgage (Ex R2, [25] -[26]).
5. As of 2 March 2023, the date of sequestration, by reason of various withdrawals and payments, the account balance in CBA account #2495 had been reduced to $23,685 (Ex R2, [27]). Mr Melnik retained a de minimis amount he had received on 23 February 2023 in CBA a/c #2495 on 2 March 2023 on a mixed fund analysis (see Dennis SK Ong, Ong on Tracing, Federation Press, 2019, 89-90). The Trustees did not pursue a de minimis tracing argument and that issue can be put to one side.
6. Mr Melnik deposed that (Ex R1, [13]):

I was not aware of the Debtor's bankruptcy when I received the surplus of the proceeds of sale of the Property. I spent the entirety of the proceeds of sale on paying the mortgage on my family home prior to becoming aware of the Trustees' email correspondence dated 6 March 2024 (sic).

1. Mr Melnik was not challenged on this evidence and I accept it.

What title did Mr Melnik acquire to the $40,807?

1. Because of the doctrine of relation back, the property of the bankrupt as of the date of commencement of the bankruptcy vested in the trustees (Re Sabri [1996] FamCA 154; (1996) 137 FLR 165, 168).
2. That statement of principle does not, however, answer the question as to what title in the money - $40,807 - did Mr Melnik acquire on 23 February 2023 which he received after the date of the commencement of the bankruptcy but before the date of sequestration order given the "relation back" principle.
3. Mr Melnik submitted that under the avoidance provisions, Mr Melnik received a "defeasible title" (Anscor Pty Ltd v Clout [2004] FCAFC 71, [43(a) - (j)]). Counsel for the Trustees drew a distinction between s. 120 and s. 115. He submitted that "what's voidable and what is a defeasible title are totally irrelevant in the interpretation of section 115" (T73: L4-6).

1. On my assessment, the prevailing authority is that the recipient of property of the bankrupt during the period of relation-back: that is, a person in the position of Mr Melnik who was the transferee of property of Mr Taib on 23 February 2023 during the period of relation-back, takes no title at all.
2. Although it was not a case I was taken to, the clearest statement of that principle is in Re Dennis (a bankrupt) [1995] 3 All ER 171 where Millett LJ said that a person receiving property from a person who became bankrupt during the period of relation-back "did not take a defeasible title ... they were regarded as having taken no title at all" (at 176). At 190, Millett LJ said:

It is clear from the authorities that the relation back of the trustee's title did not merely make the title of the debtor himself, or any person claiming through the debtor, defeasible in the event of adjudication. If the debtor was adjudicated bankrupt, then as from the date of the act of bankruptcy neither the debtor nor any such person claiming under him who could not bring himself within the protective provisions of the Bankruptcy Acts had any title at all; as from that date title was vested in the trustee. The position of the debtor and persons who claimed under him during the intermediate period was extremely curious. They did not possess a defeasible title, but either an indefeasible title if the act of bankruptcy was not followed by adjudication or no title at all if it was. Outside the law of bankruptcy no similar ambulatory title was known to the law.

(emphasis added)

1. Counsel for the Trustees also took me to an extract from "Bankruptcy in Australia - a Guidebook" at [41.2290]. It referred to the decision in Re Robinson; ex parte Geroff v Turner (31 March 1994). In Geroff, Cooper J noted:

The effect of sections 58(l)(a), 115(1) and 116(l)(a) of the Act is that all property of a bankrupt is deemed to vest in the trustee at the commencement of the bankruptcy which is fixed by relation back at a time prior to the making of the sequestration order. Thus during the period of relation back it is deemed not to have been within the power of the bankrupts to dispose of or deal with property which by the Act is deemed to have then been vested in the trustee. Securities granted before commencement of the bankruptcy bind the trustee and may be enforced by the security holder .... The position is different with securities granted after the deemed commencement date. Such securities are wholly ineffective against the trustee unless the holder of the security can bring the transaction within the protective provisions of the Act or satisfy the Court that the case is one where the trustee ought to be directed not to exercise its rights as to do so would be unfair.

1. Because he received the moneys on 23 February 2023 - the $40,807 - during the period of relation back, as against the Trustees Mr Melnik had no title at all to the $40,807.

1. I have already noted that the Respondent referred to Lindgren J's judgment in Anscor to persuade me that under s. 120 (an avoidance provision as to undervalued transactions) that Mr Melnik acquired a "defeasible title" to the $40,807 he received on 23 February 2023 albeit that the property would vest in the trustee forthwith upon the debtor becoming a bankrupt "if the property also still exists then" (Anscor, 43(g); see also Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372, 426). In Trustee of the Property of O'Halloran, in the matter of O'Halloran v O'Halloran [2002] FCA 1305 at [79] Allsop J (as his Honour then was) said with reference to the avoidance provisions:

If, prior to the commencement of the bankruptcy, the property transferred has been paid away or sold, no personal remedy lies against the transferee, even one with notice of a fraud by the transferor: Brady v Stapleton, supra. This is so because up to the commencement of the bankruptcy (even after avoidance) the transferee is taken to have had full right and title to deal with the property.

1. Section 120 (at least in part) focuses on transfers which "took place in the period beginning 5 years before the commencement of the bankruptcy", a different time period and a time period far longer than the relation-back period under s. 115. I was not taken to authorities which in terms dealt with the interaction between ss. 115 and 120. At least , a harmonious interpretation of s. 115 and s. 120 is available: a transferee of the debtor's property during the period of relation back takes no title at all under s. 115; but under s. 120 as to an undervalued transaction the transferee may take a defeasible title if the transfer is outside the period of relation-back.
2. The Trustees expressly eschewed any reliance on ss. 120 -122 and the avoidance provisions. Suffice to say, although I have no reason to doubt the correctness of the analysis of Lindgren J in Anscor as to s. 120 and, I am bound by it in any event, the analysis does not extend to the terms of s. 115 of the Act.

What follows from Mr Melnik's disposal of the property before the date of the sequestration order?

1. A further complexity arises because if it is accepted that Mr Melnik acquired no title at all to the $40,807 because he received that property during the period of relation-back, what follows from the fact that Mr Melnik disposed of the property in good faith before the date of sequestration order.
2. The in specie property he received on 23 February 2023 no longer existed to vest in the Trustee as of the date of the sequestration order. Had Mr Melnik retained in specie the $40,807 as at the date of sequestration, because he acquired no title to it, the Trustees would have been entitled to an order under s. 129(4) that Mr Melnik "pay or deliver the moneys ... to the trustee" because Mr Melnik would be a person who "has in his or her possession" that which by law he was not entitled to retain as against the Trustees. Alternatively, Mr Melnik would have been subject to a declaration and an ancillary order for the payment of the money to the Trustees under s. 30(1)(b). That is, the Trustees would be entitled to the orders they sought at orders 3 and 4 of the Amended Application. The same result appears to follow even if Mr Melnik had acquired a defeasible title. It may have been open to Mr Melnik to seek to resist such an order under s. 123 which he did not do.
3. The issue is whether the Trustees have a remedy that Mr Melnik should pay to them substitute property, a substitute $40,807, in circumstances in which he disposed of the property he received during the period of relation-back before the date of sequestration.
4. It seems to me that the Trustees - to the extent they rely solely on the provisions of the statute - fall at the final hurdle in terms of recovering $40,807 against Mr Melnik. The $40,807 he received on 23 February 2023 vests in them, but they cannot rely solely on the provisions of the statute for a declaration as to property he no longer has or to require him to disgorge property he no longer has.

1. The Guidebook authors expressly contemplated a circumstance in which the recipient of the debtor's property had disposed of property which by operation of the doctrine of relation back vested in the trustee. The authors wrote:

Where a bankrupt had disposed of property which by operation of the doctrine of relation back vested in the trustee, Beaumont J said the appropriate cause of action is a claim in restitution or unjust enrichment against the recipient. The question then arises as to whether the recipient has any valid defence to such claim, such as change of position (Re Morris, Ex parte Donnelly v Colonial Mutual Life Assurance Society Ltd (No 3) [1997] FCA 944)

1. The gist of a restitution or unjust enrichment action is that even though Mr Melnik had disposed of the $40,807 and therefore that property in specie could not vest in the Trustees, Mr Melnik would be unjustly enriched if he retained the value of $40,807. It was the Trustees' money when he received it and he acquired no title to it because of the relation-back principle. As a result, the court should order that he make restitution of a substitute amount (also likely to be $40,807) to the Trustees.
2. As I noted earlier in these reasons, as this case happened, the Trustees only specifically raised the restitution action by way of their proposed Further Amended Application at trial. I repeat that I did not permit the Trustees to file the Further Amended Application on the morning of the trial to seek an order "in restitution for moneys had and received by the Respondent in the sum of $40,807".
3. One reason (among others) that I did not permit the further amendment was that I accepted Mr Melnik's submission that had he known he was meeting an equitable claim where a remedy in restitution was sought for moneys had and received, he might have made different inquiries as to whether evidence was available to him to make good an equitable defence to such a claim, notably a change of position defence (as the Guidebook authors identified above).
4. Resolving the restitution claim may have required further evidence and the adjournment of the trial which neither party sought. A change of position defence was (at the least) a contestable issue given that Mr Melnik says that he acted in good faith and was not challenged as to this evidence: he disposed of the moneys in circumstances in which he had no knowledge of the creditor's petition at the time he received or disposed of the $40,807 (Ex R1, [13]). Ultimately, of course, if I had granted permission to the Trustees to rely on the Further Amended Application, Mr Melnik may not have been able to prove any "change of position" defence.
5. As a result, because the restitution claim was not before me, I make no findings as to whether the Trustees would be entitled to payment of the moneys in restitution and a consequential order under s. 30(1)(b) or whether Mr Melnik had a defence to any claim in restitution on the basis of change in position.
6. I do note that the terms of s. 30(1)(b) specifically contemplate the grant of a "equitable remedies" necessary for the purposes of carrying out or giving effect to the Act. However, as to the general powers of the court under s. 30(1)(b) Judge Kelly said in Woods v. Ulusouylu [2017] FCCA 935 at [224]:

... the general power conferred by para.30(1)(b) should not be construed as authorising a court to make coercive orders subjecting a transferee to personal liability for payment in circumstances where no legal, equitable or statutory liability could be identified as the foundation for that judgment.

(emphasis added)

1. I acknowledge that in this case it is proved to be of some importance that Mr Melnik disposed of property he received and the Trustees did not make a claim in restitution.

1. In conclusion, Mr Melnik did not acquire any title to the $40,807 he received on 23 February 2023 because he received it in the relation-back period. If Mr Melnik retained in specie the transferred property it would have vested in the Trustees under ss. 115 and 116 and I would have made orders under ss.129(4) or 30(1)(b). Because Mr Melnik disposed of the property it is not available as property divisible amongst the creditors bankrupt under s. 116, unless and until an equitable cause of action is made good. In circumstances in which Mr Melnik disposed of that $40,807 before the date of sequestration in good faith, the Trustees must rely on an equitable cause of action - relevantly, restitution or unjust enrichment - to be entitled to the relief they seek. They require an equitable remedy to operate in conjunction with the statutory provisions. As it happened, I did not permit them to raise the equitable action because they only sought an amendment to do so at trial. Whether Mr Melnik would have been able to establish a change of position defence is unknown.
2. In my discretion, I do not make the declaration the Trustees seek that before the date of sequestration the debtor had an interest in the property at 2A Lake Avenue, Pascoe Vale. That property no longer exists and the declaration has no utility in the absence of an ancillary order for the payment of money.
3. I do not make an order under s. 30(1)(b) or s. 129(4) that Mr Melnik pay or deliver up the $40,107 he received on 23 February 2023 because he has disposed of the in specie property: that is, he no longer has it.
4. The Trustees' entitlement to an order for restitution for $40,807 depends upon a claim I refused permission to make as they only formally made the claim on the morning of the trial. Section 30(1)(b) expressly refers to "orders granting injunctions or other equitable remedies". An order in the nature of restitution for "moneys had and received" in the sum of $40,807 is an equitable remedy which in an appropriate case may be necessary for the purposes of the Act. I do not intend to order such a remedy in this case in circumstances in which I refused permission to the Trustees to rely on the proposed Further Amended Application to seek that equitable remedy and it is unknown whether Mr Melnik had available to him an equitable defence of change of position.
5. I will dismiss the application.

1. Both parties indicated that it was likely that costs would follow the event. My tentative view is that it is likely that costs will follow the event. I accept that there may be matters of which I am currently unaware.
2. In the first instance, I direct the parties to confer as to whether an agreed position can be reached on costs. If an agreed costs position can be reached, I will make a consent order.
3. If no agreement can be reached, it is my preference to fix the amount of any costs rather than refer the matter for taxation, thereby avoiding satellite litigation as to the quantification of costs. Subject to argument, or if the parties propose a different approach, it may be appropriate to fix a lump sum for costs to "avoid the expense, delay and protraction of litigation arising out of taxation" (Commonwealth v Harrison (No 2) (2020) 381 ALR 328; [2020] FCA 786, [110]). As to the fixing of a lump sum see: Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046, [8]; Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051; (2008) 249 ALR 371, [24].
4. If no agreed position can be reached, if the Respondent should file and serve an outline of submissions (not exceeding 7 pages) as to costs which includes submissions as to the basis of the calculation of any costs, an annexure as to the quantification of costs and any necessary affidavit on or before 3 October 2025 (within 21 days).
5. The Applicants are to file and serve a responsive outline of submissions (not exceeding 7 pages) on or before 24 October 2025 and any responsive schedule as to the quantification of costs (21 days later).

1. On or before 31 October 2025, either party may notify Chambers if they require an oral hearing as to costs. Failing notification, I will determine costs on the papers.

I certify that the preceding one hundred and eight (108) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Champion.