FEDERAL COURT OF AUSTRALIA

Allen (Trustee) v Selimi, in the matter of Selimi (Bankrupt) [2026] FCA 437

ORDERS

THE COURT DECLARES THAT:

1.    Pursuant to s 120(1) of the Bankruptcy Act 1966 (Cth) the transfer of 120 ordinary shares in Brook Fields Pty Ltd ACN 672 049 946 effected on or about 1 August 2024 to the respondent is void as against the applicant.

THE COURT ORDERS THAT:

1.    Pursuant to rules 5.22(b) and 5.23(2)(c) of the Federal Court Rules 2011 (Cth), default judgment be given in favour of the applicant against the respondent.

2.    The respondent transfer the 120 ordinary shares held by him in Brook Fields Pty Ltd ACN 672 049 946 to the applicant.

3.    In default of order 2, no sooner than 28 days from the date of these orders, the register of members kept by Brook Fields Pty Ltd ACN 672 049 946 pursuant to sections 168(1) and 169 of the Corporations Act 2001 (Cth), be corrected pursuant to section 175 of the Corporations Act 2001 (Cth) to show that the 120 ordinary shares presently registered in the name of the respondent be registered in the name of Paul Allen in his capacity as trustee of the bankrupt estate of Fitim Selimi, such order to take effect nunc pro tunc.

4.    The respondent pay the applicant’s costs of the applicant’s interlocutory application, to be taxed in default of agreement.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(Delivered ex tempore, revised from transcript)

DOWLING J

1    The applicant is the trustee of the estate of the bankrupt Mr Fitim Selimi. The respondent is the bankrupt’s brother Mr Shain Selimi. The applicant’s originating application seeks relief arising from shares transferred by the bankrupt to his brother. The applicant complains that the transfer was an undervalued transaction within the meaning of s 120 of the Bankruptcy Act 1966 (Cth) or alternatively was a transfer intended to defeat creditors of the bankrupt within the meaning of s 121 of the Act. The applicant seeks declarations that the transfer was void as against the applicant and orders that the respondent transfer the shares to the applicant.

2    The applicant’s interlocutory application seeks default judgment by reason of the respondent’s failure to file and serve his defence. These reasons deal with that interlocutory application.

3    Orders of the Court required the respondent to file and serve his defence by 20 October 2025. The respondent did not file, and has not filed, his defence. The respondent has not participated in the proceeding at any stage. The respondent did not appear at the hearing of the interlocutory application.

4    The applicant’s interlocutory application for default judgment now seeks: (a) a declaration pursuant to s 120(1) of the Act that the transfer of 120 ordinary shares in Brook Fields Pty Ltd ACN 672 049 946 effected on or about 1 August 2024 to the respondent is void as against the applicant; (b) an order that the respondent transfer the shares to the applicant; (c) that the share register be amended to reflect the transfer in ownership of the shares; and (d) that the respondent pay the applicant’s costs of the interlocutory application.

5    For the reasons explained below I consider it appropriate to make the orders sought by the applicant.

BACKGROUND FACTS AND CIRCUMSTANCES

6    On 21 May 2025, the applicant commenced proceedings against the respondent by way of originating application and a statement of claim. The statement of claim relevantly alleges that:

(1)    On 15 August 2024 (the date of bankruptcy), the Federal Court made a sequestration order appointing the Official Receiver as trustee of the bankrupt estate of Mr Fitim Selimi, the bankrupt. Those orders deem the commencement of the bankruptcy to be 31 May 2024.

(2)    On 9 September 2024, the applicant was appointed trustee of the bankrupt estate pursuant to s 181A of the Act. The applicant had vested in him the property of the bankrupt from that date.

(3)    The respondent is the brother of the bankrupt. He is a “relative” and “related entity” within the meaning of s 5 of the Act.

(4)    On or around 10 October 2023, Brook Fields Pty Ltd ACN 672 049 946 (the company), a proprietary company limited by shares, was incorporated in the state of Victoria. On that date, the bankrupt was the sole director, secretary and shareholder of the company.

(5)    At the time of incorporation, 120 ordinary shares in the company were issued at a value of $1.00 per share to the bankrupt.

(6)    The shares fall within the meaning of “property” as defined by s 5 of the Act and are included as divisible property of the bankrupt within the meaning of s 116(1) of the Act.

(7)    On or about 1 August 2024, the bankrupt transferred all of the shares to the respondent. This was a transfer of property within the meaning of ss 120(1) and 121(1) of the Act.

(8)    The respondent gave no consideration for the transfer.

(9)    The transfer was an undervalued transaction within the meaning of s 120 of the Act and is void as against the applicant.

(10)    On 9 September 2024, the shares vested in the applicant by operation of s 58 of the Act.

(11)    On 25 March 2025, the applicant demanded that the respondent transfer the shares to the applicant within 14 days. The applicant did not receive a response.

7    On 23 July 2025, a copy of the originating application and statement of claim were served personally on the respondent.

8    Also on 23 July 2025, I made orders listing this matter for a case management hearing at 9:30 am on 5 September 2025. On 18 August 2025, the applicant’s solicitors posted a copy of those orders to the respondent’s address.

9    The respondent failed to appear at the case management hearing on 5 September 2025. At that hearing, I made orders (the September Orders) that the respondent file and serve a defence by 20 October 2025. On 9 September 2025, the applicant’s solicitors posted a copy of those orders to the respondent by ordinary post.

10    On 4 March 2026, the applicant filed his interlocutory application and an affidavit in support affirmed by him seeking orders in default of the September Orders requiring the filing and serving of a defence.

11    On 13 March 2026, my Chambers advised by email that the interlocutory application was to be heard on 10 April 2026. On 18 March 2026, I made orders timetabling for the parties to file and serve outlines of written submissions in relation to the interlocutory application.

12    On 19 March 2026, the solicitors for the applicant arranged for the posting of a copy of the 18 March 2026 orders to the respondent. On 24 March 2026, the solicitors for the applicant arranged for the posting of a copy of the interlocutory application, the affidavit in support, and a copy of the 13 March 2026 email, to the respondent.

13    The applicant filed his written submissions in support of the interlocutory application on 26 March 2026. Those submissions included proposed orders. The submissions and proposed orders were posted to the respondent by express post on 26 March 2026. The respondent did not file any written submissions. The respondent did not appear at the hearing of the interlocutory application. The matter was called outside the courtroom at the commencement of the hearing of the interlocutory application and the respondent still did not appear.

THE AFFIDAVITS RELIED UPON BY THE APPLICANT

14    The applicant relies on the following affidavits:

(1)    an affidavit of David Robert Holland dated 21 August 2025 (Holland Affidavit). Mr Holland deposes that on 23 July 2025 he personally served on the respondent, at the respondent’s address, the originating application and statement of claim;

(2)    an affidavit of Lynette Anne Harding dated 2 September 2025. Ms Harding deposes that she posted a letter to the respondent’s address by “ordinary prepaid post” on 18 August 2025, which included my orders of 23 July 2025;

(3)    an affidavit of Lynette Anne Harding dated 10 November 2025. Ms Harding deposes that on 9 September 2025, she posted a letter to the respondent by “ordinary prepaid post”. That letter included my the September Orders;

(4)    an affidavit of Paul Anthony Allen dated 3 March 2026 (Allen Affidavit), filed in support of the interlocutory application; and

(5)    an affidavit of Lynette Anne Harding dated 26 March 2026. Ms Harding deposes to arranging for two letters to be posted on 19 March 2026 and 24 March 2026. The earlier letter enclosed my orders of 18 March 2026. The later letter enclosed the interlocutory application, the Allen Affidavit, and the email from my Chambers on 13 March 2026 notifying the parties about the listing of the interlocutory hearing today.

PRINCIPLES ON DEFAULT JUDGMENT AND DELCARATORY RELIEF

15    The applicant seeks default judgment against the respondent pursuant to rr 5.22 and 5.23(2)(c) of the Federal Court Rules 2011 (Cth).

16    Rule 5.22 provides that a party is in default if the party fails to (a) do an act required to be done, or to do an act in the time required, by the Rules; or (b) comply with an order of the Court; or (c) attend a hearing in the proceeding; or (d) prosecute or defend the proceeding with due diligence.

17    Rule 5.23(2)(c) provides that if a respondent is in default in a proceeding started by an originating application supported by a statement of claim, the applicant may apply to the Court for an order giving judgment against the respondent for the relief claimed in the statement of claim to which the Court is satisfied that the applicant is entitled.

18    The principles applicable to the discretion to enter default judgment were helpfully and clearly summarised by Neskovcin J in Hugo Boss AG v Hardge [2024] FCA 1325 at [20]:

(a) the power to give default judgment against a party under r 5.23(2) remains discretionary, and caution must be exercised when an applicant seeks orders against a defaulting respondent: Speedo Holdings BV v Evans (No 2) [2011] FCA 1227 at [20] (Flick J); Chamberlain Group, Inc v Giant Alarm System Co, Ltd (No 2) [2019] FCA 1606 at [13] (Yates J);

(b) the discretionary power to enter a default judgment is enlivened when an applicant applies to the Court for such an order and where a respondent is in default: Speedo at [22] (Flick J);

(c) for the purpose of r 5.23(2)(c), the Court needs to be “satisfied” on the face of the statement of claim that the applicant is entitled to the “relief” claimed and that the Court has jurisdiction to grant that relief. The facts as alleged in the statement of claim are deemed to have been admitted by the respondent: Speedo at [23] (Flick J) and the cases cited there;

(d) in addition to the facts alleged in the statement of claim, the Court may permit recourse to further limited evidence but may not admit evidence that would alter the case as pleaded: Speedo at [26] (Flick J);

(e) to be satisfied that an applicant is “entitled to” the relief claimed, the Court must be satisfied that “each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim”: Speedo at [24] (Flick J), referring to Macquarie Bank v Seagle (2005) 146 FCR 400; [2005] FCA 1239 at [24] (Conti J) and Macquarie Bank Ltd v Seagle [2008] FCA 1417 at [20] (Jagot J)

19    Of course, the Court must be satisfied that the respondent has been served with the relevant documents and that the Court has jurisdiction to grant the relief: see Speedo at [18] (Flick J).

20    In relation to declaratory relief in cases of default judgment, r 5.23 does not restrain the Court’s power to order declaratory relief pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth), and it is now established that refusals by the courts in the past to make declarations in cases of default and deemed admissions were based on a practice, not a rule of law: see Yeo v Damos Earthmoving Pty Ltd, in the matter of Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129 at [16] (Gordon J) and the cases cited. Where, as in this case, the respondent has a genuine interest in opposing the declaratory relief sought, I do not consider the fact that the respondent did not appear at the hearing today poses an insurmountable obstacle to the Court’s power to grant declaratory relief: see Geneva Laboratories Ltd v Prestige Premium Deals Pty Ltd (No 4) [2016] FCA 867; 120 IPR 133 at [79] (Bromwich J); Australian Competition and Consumer Commission v MSY Technology Pty Ltd [2012] FCAFC 56 at [14] and [30] (Greenwood, Logan and Yates JJ).

21    In Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 the High Court (Mason CJ, Dawson, Toohey and Gaudron JJ) said at 582 in relation to declaratory relief generally:

(1)    it must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions;

(2)    the person seeking relief must have a “real interest”; and

(3)    relief will not be granted if the question is “purely hypothetical”, or if relief is claimed in relation to circumstances that have not occurred and might never happen, or if the Court’s declaration will produce no foreseeable consequences for the parties.

WAS THERE EFFECTIVE SERVICE AND DEFAULT?

22    An originating application and statement of claim are required to be served personally on a named respondent: see r 8.06 of the Rules. A document that is to be served personally on an individual must be served by leaving the document with the individual: see r 10.01. I am satisfied from the matters set out in the Holland Affidavit that this took place on 23 July 2025.

23    The other documents in this proceeding discussed in the affidavits at [14] above are not required to be personally served, and may validly be served by sending the document by pre-paid post addressed to the person at the person’s proper address: see r 10.31(b). “Proper address” is defined in Schedule 1 of the Rules to include the person’s address for service, or if the person has no address for service, the person’s usual or last-known business or residential address. Documents sent by pre-paid post are taken to have been served on the respondent on the seventh business day after the document was sent: see r 10.32(a).

24    I am satisfied that all of the relevant documents were served on the respondent by pre-paid post in accordance with the Rules. Those documents include: the September Orders that required the respondent to file and serve his defence, the applicant’s interlocutory application and supporting affidavit, the court’s advice of the hearing date for the interlocutory application, the applicant’s written submissions on the interlocutory application, and the applicant’s proposed orders on the interlocutory application.

25    I am satisfied that the respondent has not filed and served his defence in accordance with the September Orders.

IS THE APPLICANT ENTITLED TO THE RELIEF CLAIMED?

26    The applicant says that the Court can be satisfied he is entitled to the relief that he claims.

27    Section 120(1) of the Act provides that:

A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:

(a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and

(b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.

28    Section 120(7)(b) of the Act provides that “a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person” for the purposes of s 120 of the Act.

29    Section 5 of the Act defines “property” to mean “real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property.”

30    Section 120(7)(c) of the Act provides that the “market value” of the property transferred is its market value at the time of the transfer.

31    Section 120(5) of the Act provides a list of matters that have no value as consideration for the purposes of s 120(1):

(a)    the fact that the transferee is related to the transferor;

(b)    if the transferee is the spouse or de facto partner of the transferor – the transferee making a deed in favour of the transferor;

(c)    the transferee's promise to marry, or to become the de facto partner of, the transferor;

(d)    the transferee's love or affection for the transferor;

(e)    if the transferee is the spouse, or a former spouse, of the transferor – the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975;

(f)    if the transferee is a former de facto partner of the transferor – the transferee granting the transferor a right to live at the transferred property, unless the grant relates to a transfer or settlement of property, or an agreement, under the Family Law Act 1975 or the Family Court Act 1997 (WA).

32    The applicant submits, and I accept, that the elements of his claim under s 120(1) are as follows:

(1)    there was a transfer of property;

(2)    the transfer was by a person who later became a bankrupt;

(3)    the transfer took place in the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and

(4)    the transferee gave no consideration for the transfer or give consideration of less than the market value of the property.

33    As stated at [18]-[19], I need to be satisfied on the face of the statement of claim that the applicant is entitled to the relief claimed and the Court has jurisdiction to grant that relief. The facts as alleged are deemed to have been admitted by the respondent: Speedo at [23] (Flick J) and the cases cited there. To be satisfied an applicant is entitled to the relief claimed, I must be satisfied each element of the relevant civil wrong involved is properly and discretely pleaded in the statement of claim: see Speedo at [24] (Flick J).

34    I now consider each of the elements of the applicant’s claim under s 120(1) of the Act as they are pleaded in the statement of claim and as they are referred to in the Allen Affidavit.

Was there a transfer of property?

35    Paragraph [9] of the statement of claim pleads that on or about 1 August 2024, the bankrupt transferred 120 ordinary shares in the company to the respondent. Paragraph [10] of the statement of claim pleads that the transfer was a transfer of property within the meaning of ss 120(1) and 121(1) of the Act. Those pleadings are taken to be admitted.

36    Mr Allen deposes at [10(b)] of his affidavit that on 1 August 2024, the bankrupt transferred all 120 shares in the company to the respondent.

37    I am satisfied that, on or about 1 August 2024, the bankrupt transferred property to the respondent within the meaning of s 120(1).

Was the transfer by a person who later becomes bankrupt?

38    Paragraph [1(b)] of the statement of claim pleads that Mr Allen was appointed as the trustee of the bankrupt estate of Mr Fitim Selimi on 9 September 2024 following the making of the sequestration order by the Court on 15 August 2024 appointing the Official Receiver as the trustee of the bankrupt estate. Paragraph [1(b)] of the statement of claim also pleads the date of bankruptcy (for the purposes of s 120(1)(a)) as 15 August 2024.

39    The Allen Affidavit discloses that the Court: (1) made and appointed the Official Trustee as the trustee of the bankrupt estate of the bankrupt on 15 August 2024; and (2) ordered that the estate of Mr Fitim Selimi be sequestrated under the Act on 15 August 2024. The affidavit exhibits the Court’s order.

40    I am satisfied that Mr Fitim Selimi, being the person who effected the transfer of property on 1 August 2024, later became a bankrupt for the purposes of s 120(1) of the Act on 15 August 2024.

Did the transfer take place in the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy?

41    Section 120(1)(a) of the Act requires the transfer to have taken place in the period beginning five years before the commencement of the bankruptcy and ending on the date of the bankruptcy.

42    By operation of ss 5 and 115(1B) of the Act, the commencement of the bankruptcy is the date of the first act of bankruptcy. Paragraph [3] of the statement of claim pleads that pursuant to s 115 of the Act and the orders of the Court on 15 August 2024, the bankruptcy of the bankrupt is deemed to have commenced on 31 May 2024.

43    By operation of s 5 of the Act, the date of the bankruptcy is taken to be the date of the sequestration order. Paragraph [1(b)] of the statement of claim pleads that the sequestration order was made by this Court on 15 August 2024.

44    Paragraph [9] of the statement of claim pleads that on or about 1 August 2024, the bankrupt transferred all shares to the respondent.

45    I am satisfied that the transfer, having taken place on 1 August 2024, took place within the period beginning five years before the commencement of the bankruptcy (31 May 2024) and ending on the date of the bankruptcy (15 August 2024).

Was there no consideration, or less than market value consideration, for the transfer?

46    Paragraph [11] of the statement of claim pleads that the respondent gave no consideration for the transfer. Paragraph [12] of the statement of claim also pleads that the transaction was an undervalued transaction within the meaning of s 120 of the Act because the respondent gave no consideration for the transfer.

47    Mr Allen deposes at [27] of his affidavit that from his review of the bankrupt’s bank records held with National Australia Bank, Commonwealth Bank of Australia and Australia and New Zealand Banking Group Pty Ltd, there is no indication that the bankrupt received any consideration in exchange for the shares.

48    I am satisfied that the respondent gave no consideration for the transfer of the shares.

49    In the alternative, the applicant submits that if there was consideration in exchange for the shares, it was less than the market value of the shares. Mr Allen deposes at [28] and [29] of his affidavit his opinion as to the market value of the shares by reference to proceeds from properties sold by the company. In circumstances where I am satisfied that the respondent gave no consideration for the transfer of shares, it is not necessary for me to determine the alternative that the consideration was less than market value.

Do any exemptions under s 120(2) apply?

50    Section 120(2) of the Act provides that s 120(1) does not apply to (a) a payment of tax payable under a law of the Commonwealth or of a State or Territory; or (b) a transfer to meet all or part of a liability under a maintenance agreement or a maintenance order; or (c) a transfer of property under a debt agreement; or (d) a transfer of property if the transfer is of a kind described in the regulations.

51    There is no evidence that any of these exemptions apply. There is also no pleading that any of these exemptions apply.

Conclusions on the applicant’s entitlement to the relief sought

52    For all of the above reasons, I am satisfied that the statement of claim and the Allen Affidavit establish the applicant’s entitlement to the relief claimed.

Should the declarations and orders sought be made?

Declarations

53    The applicant seek a declaration that, pursuant to s 120(1) of the Act, the transfer of 120 ordinary shares in the company effected on or about 1 August 2024 to the respondent is void as against the applicant.

54    I am satisfied that the declarations sought are within the Court’s power to declare. I am satisfied that the proposed declarations are properly directed to the determination of legal controversies and not to answering abstract or hypothetical questions, in the sense described in Ainsworth. I am satisfied, consistent with the principles discussed above, that there is no restriction on making the declaration in the circumstances of default in this case. I will make the declaration in the form sought by the applicant.

Register corrections

55    The applicant seeks an order pursuant to ss 175 and 1072E(6) of the Corporations Act 2001 (Cth) so that the register of members of the company maintained pursuant to ss 168 and 169 of the Corporations Act can be corrected to record the applicant as the holder of the shares instead of the respondent.

56    Section 175 of the Corporations Act provides that:

(1) A company or registered scheme or a person aggrieved may apply to the Court to have a register kept by the company or scheme under this Part corrected.

(2) If the Court orders the company or scheme to correct the register, it may also order the company or scheme to compensate a party to the application for loss or damage suffered.

(3) If:

(a) the Court orders a company or scheme to correct its register of members; and

(b) the company or scheme has lodged a list of its members with ASIC;

the company or scheme must lodge notice of the correction with ASIC.

57    Rectification of a register pursuant to s 175 requires the applicant to show a personal equity that the court will protect. Prima facie, such an equity is shown if a person’s name is wrongly omitted from the register; however, the court has a broad discretion whether to order the correction of the register of members and may decline to order rectification if there is some reason why that should not occur: see Grant v John Grant & Sons Pty Ltd (1950) 82 CLR 1 at 51 (Fullagar J), as applied in Centura Global Holdings Pty Ltd [2016] NSWSC 62; 111 ACSR 185 at [53] (Black J). McKerracher J made an order of the type sought by the applicant in Verge v Devere Holdings Pty Ltd (No 5) [2010] FCA 1452.

58    I consider that it is appropriate to order that the company’s register of members be amended in default of the respondent transferring the shares to the applicant in accordance with the other order that I make.

DISPOSITION

59    For all of those reasons, and in all of those circumstances set out above, I consider it is appropriate to make the declaration and orders sought by the applicant.

Associate:

Dated:    14 April 2026