Honi was a famous artist. He became bankrupt on 1st February 2009 when a sequestration order was made. The bankruptcy petition was based on Honi’s failure to comply with a bankruptcy notice on 27th November 2008.
Honi had the following debts:

•   Trade creditors $1.5 million.
•   Money owing to Samantha, a former employee, being $5,000 for wages and $2,000 for long service leave.
•   Unpaid taxation deduction for Samantha’s wages and superannuation $2,000.
•   Unpaid Child support for his son Heke $150,000.
The costs of the petitioning creditor and the trustee total $10,000 each
Honi died on 28th February 2009. His funeral and cremation expenses totaled $8,000

The trustee has located the following assets.

•   Cash in Honi’s bank account $20,000 (proceeds of auction)
•   Paintbrushes and art material $3,800
•   Paintings $85,000 (not the ones sold at auction)
•   Life insurance policy of $50,000 taken out in 1998.

The trustee discovers the following facts:

On 10th August 2007 Honi had settled $10,000 on Pania in anticipation of their marriage. The marriage took place on 11th August 2007. Pania died on January 21st 2008. $10,000 was spent on funeral expenses. On 15th March 2008 Honi gave Goldi a painting worth $50,000. On June 1st 2008, Honi failed to comply with a bankruptcy notice. On 25th June 2006 Honi sold his Jaguar car worth $25,000 to Goldi for $100. On 30th January 2009 Honi sold paintings he thought to be worth $200,000 at public auction. The paintings realised only $20,000 and were bought by Honi’s mother.

Required:

Stating legislative provisions in the Bankruptcy Act 1966 (Cth) and appropriate case law, where possible, advise the trustee what debts have priority and how much each will receive.

Answer rating: 100% (QA)

Answers The payment for Honis debts is done by the following order 1 The payment of t... View the full answer