The Power of the 139ZQ Notice

  • TurkAlert
  • Published 16.07.2021

Davidson v Official Receiver (FCAFC 2021)

Key Takeaways 

A 139ZQ notice can be issued right up until the last day of any applicable limitation period. It will not be invalidated merely because the underlying claim will be statute barred before the notice is complied with or enforced.

Brief Facts

The relevant key dates and events were as follows:

  • On 16 December 2013, Mr William Stephen Vlahos became bankrupt.
  • On 16 December 2016, Mr Vlahos was discharged from bankruptcy.
  • On 6 December 2019, the Official Receiver issued to Mr Davidson a notice under s139ZQ (the Notice) of the Bankruptcy Act 1966 (the Act) demanding payment of $12,507,025.84 to Mr Vlahos’ trustee representing the sum total of payments that he had received from the bankrupt, which the trustee contended were void under s120(1) of the Act.
  • On 16 December 2019, the limitation period within which Mr Vlahos’ trustee was required to commence any action against Mr Davidson with respect to a claim under s120 of the Act lapsed.
  • Mr Davidson was required to comply with the Notice by 4 February 2020.
  • Before 4 February 2020, Mr Davidson applied to the FCC to set aside the Notice on the ground that it was issued out of time.

Questions for Determination 

The issues at first instance and on appeal were:

  1. Was the Notice valid notwithstanding that the limitation period for the trustee to commence an action against Mr Davidson under s120 of the Act had expired before the Notice had to be complied with or could be enforced? 
  2. Had the trustee impermissibly extended the limitation period by issuing the Notice?
  3. Can a 139ZQ notice be issued after a bankrupt has been discharged from bankruptcy?

The Power of the 139ZQ notice 

Section 139ZQ of the Act provides an efficient and cost effective administrative mechanism or ‘short cut’ for a trustee to recover money or property transferred to a person by a bankrupt under a transaction that is void against the trustee of a bankrupt estate.  

Instead of commencing proceedings, the official receiver (on its own initiative or on the application of the trustee) can issue a written notice to the person who received the bankrupt’s property, requiring them to pay or transfer to the trustee the value of the property, or the property itself, within the time prescribed by the notice. 

Unless the notice is set aside by the court, the subject property is charged with the person’s obligation to make payment or transfer the property to the trustee. Any amount claimed in the notice may also be recovered by the trustee from the person as a debt. 


Mr Davidson was unsuccessful at first instance and on appeal in having the Notice set aside.

The Court rejected Mr Davidson’s contention that, in order for the Notice to be valid, it had to be not only issued within the limitation period imposed by s127(3) of the Act but also either complied with or sought to be enforced before the limitation period expired. The Court held that a notice issued within the limitation period of s127(3) of the Act does not become invalid simply because it is not complied with or enforced before the limitation period expires.

As the Notice was issued within the relevant limitation period, that is, within six years of the date of bankruptcy, Mr Davidson could not rely on s127(3) of the Act to set aside the Notice. In the circumstances, the Court found that the trustee was free to bring an action under s139ZQ(8) of the Act to recover the sum payable under the Notice as the transaction, the subject of the Notice was voidable at the time the Notice was issued.

The Court also disagreed with the proposition that the trustee had impermissibly extended the six year limitation period by issuing the Notice 10 days before the period expired. The Court held that an ‘action’ under s127(3) of the Act includes taking proceedings or other steps to recover money under the transaction, including the issue of a 139ZQ notice.

The Court also rejected Mr Davidson’s submission that the reference to ‘trustee of a bankrupt’ in 139ZQ of the Act does not give power to a trustee of a former bankrupt to issue a 139ZQ notice. The Court acknowledged the ongoing function and obligation of a trustee to administer the estate of the bankrupt even after the bankrupt has been discharged. 


This case underscores the power and utility of the 139ZQ notice. Whilst this case confirms that the notice can be issued right up to the end of the limitation period, it is important to be mindful that the notice is issued by the official receiver on the application of a trustee. Trustees must factor in the time that will be required for the official receiver to issue the notice.

Fiona Reynolds


P: 02 8257 5751

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