Allen (Trustee) v Selimi, in the matter of Selimi (Bankrupt)

Allen (Trustee) v Selimi, in the matter of Selimi (Bankrupt) [2026] FCA 437 is a Federal Court decision about a transfer of shares in a private company shortly before bankruptcy. The trustee of the bankrupt estate alleged that the bankrupt transferred 120 ordinary shares in Brook Fields Pty Ltd to his brother for no consideration. The respondent did not file a defence, did not participate in the proceeding, and did not appear at the hearing of the trustee's interlocutory application for default judgment.

The court was satisfied that the respondent had been served, was in default, and that the trustee's pleaded case established the elements of s 120(1) of the Bankruptcy Act 1966 (Cth). It declared the transfer void as against the trustee, ordered the respondent to transfer the shares to the trustee, and made a fallback order allowing the company's register of members to be corrected if the respondent did not comply.

The commercial story is a family share transfer followed by bankruptcy and a recovery action by the trustee. Fitim Selimi originally held all 120 ordinary shares in Brook Fields Pty Ltd. The company had been incorporated on or around 10 October 2023, and at that time he was its sole director, secretary and shareholder. The shares were issued to him at $1 each.

According to the trustee's pleaded case, on or about 1 August 2024 Fitim Selimi transferred all 120 shares to his brother, Shain Selimi. Shortly afterwards, on 15 August 2024, the Federal Court made a sequestration order. For bankruptcy purposes, the bankruptcy was deemed to have commenced on 31 May 2024. On 9 September 2024, Paul Allen was appointed trustee of the bankrupt estate.

The trustee's position was that the shares were property that should vest in the estate for the benefit of creditors. He alleged that the transfer to the brother was void against him under s 120 of the Bankruptcy Act because it occurred within the relevant period before bankruptcy and the respondent gave no consideration for it. The trustee also pleaded an alternative case under s 121, alleging a transfer intended to defeat creditors, but that alternative case did not need to be decided once the court was satisfied about s 120.

Before seeking final relief, the trustee demanded on 25 March 2025 that the respondent transfer the shares back within 14 days. There was no response. That non-response became part of a broader pattern. The respondent did not engage with the proceeding at any stage.

The dates matter in this case because s 120 focuses on transfers made within a defined period before bankruptcy. The court identified both the date of bankruptcy and the deemed commencement of bankruptcy, and then considered whether the share transfer fell within the relevant period.

Here is the sequence the court relied on. Brook Fields Pty Ltd was incorporated on or around 10 October 2023. On or about 1 August 2024, the bankrupt transferred the shares to the respondent. On 15 August 2024, the court made the sequestration order. The bankruptcy was deemed to have commenced on 31 May 2024. On 9 September 2024, Paul Allen was appointed trustee. The trustee later demanded return of the shares on 25 March 2025. Proceedings were commenced on 21 May 2025. The respondent was personally served on 23 July 2025, failed to appear at the case management hearing on 5 September 2025, failed to file a defence by 20 October 2025, and default judgment was granted on 10 April 2026, with reasons published on 14 April 2026.

This was not a contested trial where both sides gave evidence and argued over valuation or motive. It was an application for default judgment under the Federal Court Rules. That matters because default judgment is not automatic. Even if the respondent ignores the case, the applicant still has to show that the respondent is in default, that service has been effected, and that the statement of claim properly pleads each element of the cause of action relied on.

The procedural history was detailed. The trustee commenced proceedings on 21 May 2025 by originating application and statement of claim. On 23 July 2025, those documents were personally served on the respondent. The matter was listed for a case management hearing on 5 September 2025. The respondent failed to appear. The court then ordered him to file and serve a defence by 20 October 2025. He did not do so.

On 4 March 2026, the trustee filed an interlocutory application for default judgment supported by affidavit evidence. The court's chambers later advised that the application would be heard on 10 April 2026, and timetabling orders were made for written submissions. Copies of the relevant orders, the interlocutory application, the supporting affidavit, the hearing notice, the trustee's written submissions, and proposed orders were posted to the respondent. He still did not file submissions and did not appear at the hearing. The matter was called outside the courtroom at the commencement of the hearing and the respondent still did not appear.

The court reviewed affidavit evidence about service, including personal service of the originating application and statement of claim and postal service of later documents. It was satisfied that service had been effected in accordance with the Rules and that the respondent was in default because he had not filed a defence as ordered.

The immediate question was whether the court should enter default judgment. To do that, the court had to be satisfied on the face of the statement of claim that the trustee was entitled to the relief claimed and that the court had jurisdiction to grant it. The court referred to established authority that each element of the relevant civil wrong must be properly and discretely pleaded. The court could also look at limited affidavit evidence, but not in a way that changed the case as pleaded.

The substantive issue was whether the pleaded facts established the elements of s 120(1) of the Bankruptcy Act. In practical terms, the court asked four questions. First, was there a transfer of property? Second, was the transfer made by a person who later became bankrupt? Third, did the transfer occur within the period beginning five years before the commencement of the bankruptcy and ending on the date of bankruptcy? Fourth, did the transferee give no consideration, or consideration of less than market value?

The court also considered whether any of the statutory exemptions in s 120(2) appeared to apply. It found there was no evidence and no pleading suggesting that any exemption applied. In addition, because the trustee sought a declaration and an order correcting the register of members, the court considered its power to grant declaratory relief and to order rectification of the register under the Corporations Act.

On the first element, the court was satisfied there had been a transfer of property. The statement of claim pleaded that on or about 1 August 2024 the bankrupt transferred 120 ordinary shares in the company to the respondent, and that pleading was taken to be admitted because of the respondent's default. The trustee's affidavit also deposed that the transfer occurred on that date. The court accepted that the shares were property for the purposes of the Bankruptcy Act.

On the second element, the court was satisfied that the transfer was made by a person who later became bankrupt. The statement of claim pleaded, and the affidavit evidence showed, that a sequestration order was made on 15 August 2024 and that the trustee was later appointed on 9 September 2024. The court accepted that Fitim Selimi, who made the transfer on 1 August 2024, later became bankrupt on 15 August 2024 for the purposes of s 120.

On the third element, the court considered the timing requirement. The bankruptcy was deemed to have commenced on 31 May 2024, while the date of bankruptcy was 15 August 2024. Because the transfer occurred on 1 August 2024, it fell within the period beginning five years before the commencement of bankruptcy and ending on the date of bankruptcy. The timing requirement was therefore satisfied.

On the fourth element, the court was satisfied that the respondent gave no consideration for the transfer. The statement of claim pleaded that no consideration was given. The trustee's affidavit added 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 was no indication that the bankrupt received any consideration in exchange for the shares. That was enough for the court to conclude that no consideration had been given.

The trustee had also argued in the alternative that, if there was consideration, it was less than market value. The court did not need to decide that alternative because it was already satisfied there was no consideration. Likewise, it did not need to determine the alternative s 121 case about an intention to defeat creditors.

The court granted default judgment in favour of the trustee. It declared that, pursuant to s 120(1) of the Bankruptcy Act, the transfer of 120 ordinary shares in Brook Fields Pty Ltd effected on or about 1 August 2024 to the respondent was void as against the trustee.

The court then made practical orders to unwind the transaction. It ordered the respondent to transfer the 120 shares to the trustee. It also ordered that, if the respondent did not comply with that transfer order, then no sooner than 28 days from the date of the orders the company's register of members could be corrected under s 175 of the Corporations Act to show Paul Allen, in his capacity as trustee of the bankrupt estate of Fitim Selimi, as the registered holder of the shares instead of the respondent. The order was to take effect nunc pro tunc.

The court also ordered the respondent to pay the trustee's costs of the interlocutory application, to be taxed in default of agreement. This is important because it shows the court was not merely making an abstract declaration. It was making operative orders designed to restore the ownership position and ensure the company records reflected that result.

On the register issue, the court accepted that rectification under s 175 of the Corporations Act was appropriate in default of the respondent transferring the shares. The court referred to authority showing that rectification requires a personal equity the court will protect and that the court has a broad discretion. In the circumstances, it considered rectification appropriate.

One of the most useful parts of this case for business owners is the court's focus on the mechanics of ownership. In a private company, ownership is often evidenced through the register of members. If a disputed transfer is later unwound, the register may need to be corrected so that legal title and the company's records align.

That means documentation matters at two levels. First, there is the transaction itself. If shares are transferred, there should be clear evidence of what was transferred, when, by whom, and for what consideration. Second, there are the company's records. The register of members should accurately record the current holder. If the register is wrong, the problem is not merely administrative. It can affect voting, dividends, control, and dealings with third parties.

In this case, the trustee relied not only on the pleaded transfer but also on bank record review to support the allegation that no consideration had been paid. The court accepted that evidence for the purpose of the default judgment application. For businesses, that is a reminder that if consideration is genuinely paid, there should be records showing it. Informal family arrangements with no payment trail are especially vulnerable to later challenge.

For a business owner, this case is about risk around ownership changes when personal insolvency is near. Many small businesses are operated through a proprietary company, and the real economic value sits in the shares. If those shares are transferred to a relative or associate without proper value changing hands, a trustee may later seek to recover them for the bankrupt estate.

The case also shows that the consequences are not limited to a legal declaration. If the transfer is unwound, control of the company may shift. The person shown on the register may change. That can affect who votes, who receives dividends, and who is recognised as the owner for corporate purposes. In a family business, that can be commercially disruptive as well as legally significant.

There is also a process lesson. If there is a genuine commercial explanation for a transfer, it needs to be put before the court. The respondent here did not file a defence, did not provide submissions, and did not appear. The court therefore assessed the trustee's pleaded case without any competing explanation. Once the court was satisfied the statutory elements were made out, it granted the relief sought.

The safer approach for founders, directors and advisers is to treat any transfer of shares, units or other ownership interests near insolvency as a high-risk event. Before proceeding, check whether the transferor is solvent, whether there is genuine consideration, whether the transaction is properly documented, and whether the company's records accurately reflect what happened. If bankruptcy or creditor pressure is already in the picture, legal advice should be obtained before assets are moved.

This page summarises the Federal Court's published reasons and orders in Allen (Trustee) v Selimi, in the matter of Selimi (Bankrupt) [2026] FCA 437. The reasons identify the parties, the share transfer, the bankruptcy timeline, the service history, the default, the statutory basis for relief under s 120(1) of the Bankruptcy Act, and the order permitting correction of the register of members under the Corporations Act.

Because the matter was decided on a default judgment application, the court proceeded on the pleaded facts and limited affidavit material before it. The judgment is still useful for business readers because it shows how a trustee can recover shares in a private company and how the court can deal with the company's register to make the relief effective.