WA Division Conference Preview: Recent developments in personal insolvency
08/08/2025
Ahead of the WA Division Conference later this month, this article previews the session Recent developments in personal insolvency to be presented by Malcolm Field RITF, Director, SV Partners, and Hector West RITP, Partner, Hall & Wilcox Lawyers. As this preview reveals, their session will illuminate the complexities and escalating costs of real estate property orders in bankruptcy. It details challenges like partition orders involving multiple owners and family homes, and the unpredictable scrutiny from courts regarding case management.
Bankruptcy trustees often face unexpected challenges when attempting to realise real estate assets. While the law governing trustee rights may appear black and white, the practicalities of navigating the legal system, particularly concerning property orders, are far from simple. Malcolm Field RITF, Director at SV Partners, aims to provide practical feedback on these complexities in his upcoming presentation at the WA Division Conference with Hector West RITP, Partner, Hall & Wilcox Lawyers, helping trustees to navigate complicated legal processes while remaining pragmatic in the face of escalating costs.
The intricate web of property ownership and external factors
Trustees frequently encounter a myriad of complexities when dealing with real estate assets, extending far beyond the initial assessment of ownership. A primary source of this complexity stems from what the courts refer to as ‘Partition Orders,’ which may come into play where multiple owners of a property are involved, as Malcolm Field explains.
"While a bankruptcy trustee receives a legal vested interest in property, it's only the property of the bankrupt that we receive. So, if there's a husband and a wife who are a couple of owners, then we receive half a share, theoretically at least,” Malcolm states.
This ultimately raises the question of whether one co-owner has the right to compel the other to sell – and that’s where partition law comes into play. This challenge is amplified when family dynamics are involved, with the interweaving of legal jurisdictions and personal circumstances adding layers of unpredictability and risk for the trustee. Malcolm gives a hypothetical example where a husband in a marriage may be bankrupt, but the wife is not. There may also be young children involved, with the family rightly asserting their rights to the family home. This is even before the Federal and Family Courts are involved.
Malcolm further highlights the financial peril in such a situation: "The risk for a bankruptcy trustee that you might think there's $100,000 worth of equity in front of you available to be realised, and that in a best case it might cost $20,000-$25,000 to get orders and gain access to the property, and then a bit more to get it sold, and maybe there's $50,000 net to try to collect.”
“But if the legal costs for that go up by another $25,000 or $30,000, it becomes a pretty marginal exercise as to whether there's any recovery at all."
Navigating the courtroom: unforeseen scrutiny and the cost of detail
One of the most significant challenges for trustees is aligning their pragmatic approach with judicial expectations, which can sometimes appear disconnected from the realities of bankruptcy administration. Malcolm reasons that Judges may scrutinise what they perceive as an absence of complexity in an administration, particularly when the trustee has simplified court applications to focus on obtaining property orders. This can lead to unexpected demands for more detailed information and a protracted legal process.
Such judicial observations can force trustees to present a far more comprehensive narrative of the estate's entire history, including issues like bankrupt non-compliance or income reporting discrepancies, even if these details were not deemed directly relevant to the property orders being sought. This means that while practitioners may strive for efficiency by providing concise affidavits, the court's view might necessitate a much more exhaustive submission upfront, with the difference in approach potentially prolonging the process and increasing costs.
In this context, one of the key themes Malcolm hopes to explore in the session is the need for trustees to “discuss with their lawyers whether it's advantageous to include more detail up front in the application so that the application actually paints a full picture of the estate.”
Pragmatism over perfection: the unwavering power of a deal
Given such inherent complexities, escalating costs, and unpredictable judicial scrutiny, Malcolm also hopes the session will prompt delegates to consider a pragmatic approach in such matters, and to explore the strategic advantage of negotiated settlements.
"If you can cut a deal, then you're most likely – and more importantly, the creditors are most likely – to be better served by that deal than by trying to get in front of the court to obtain the best outcome. Or what might be considered the most suitable and legally obtainable outcome."
Financial implications alone make this approach compelling. Malcolm adds that pursuing court orders can incur tens or even hundreds of thousands of dollars in expenses, especially when dealing with "extraneous considerations" or unsubstantiated claims of equitable interest, such as a family member claiming the bankrupt is holding the property in trust for them.
Malcolm Field's insights underscore that while the Insolvency Practice Schedule 2 of the bankruptcy legislation grants judges broad powers to make orders "as it thinks fit", trustees must equip themselves to navigate an often unpredictable and costly legal landscape. The practitioner of 25 years hopes that a key takeaway from his presentation with Hector West at the WA Division Conference is for practitioners to balance the theoretical "black and white" rights of a trustee with the practical realities of a complex legal system.
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