This is a case where Mr Tieng Dung Do, in his capacity as a former joint Trustee of the Andrew Superannuation Fund and Do Construction Pty Ltd in its capacity as Trustee of the Andrew Superannuation Fund, sought orders for appeal in the Federal Court of Australia. In their notices of appeal, the following grounds were noted:
whether the rebuttable presumption in s 128B(5) of the Bankruptcy Act was established by the Trustee (Issue 1);
assuming the rebuttable presumption in s 128B(5) of the Bankruptcy Act was established, whether the primary judge failed to consider whether Mr Do had rebutted the presumption (Issue 2);
if the primary judge had in fact made a finding at J [127] that Mr Do failed to discharge the rebuttable presumption in s 128B(5) of the Bankruptcy Act, whether his Honour provided adequate reasons for reaching that conclusion (Issue 3);and
whether the primary judge failed to consider whether the rebuttable presumption in s 128B(5) of the Bankruptcy Act had been discharged and that at the time of the FY13 Transfers Mr Do was not, or was not about to, become insolvent (Issue 4).
Statutory Provisions
- Bankruptcy Act 1966 (Cth) s 128B subs (1)(c), (2), (3),(5)
- Bankruptcy Legislation Amendment (Anti-avoidance) Act 2006 (Cth)
- Bankruptcy Legislation Amendment (Superannuation Contributions) Act 2007 (Cth)
Considerations
Issue 1
The Court considered the history of s 128B of the Bankruptcy Act. It was said to be based on the existing s 121 of the Bankruptcy Act. It was noted that there are, as the primary judge observed, no authorities which have considered s 128B(5) of the Bankruptcy Act nor it seems the construction of its analogues in s 120(3A) or s 121(4A). The Court considered the cases of Re Mutton and Re Aarons concluding that the phrase in s 270(1)(a), was given a narrow construction, similar to that propounded by Mr Do and Do Constructions.
In deciding who shared the onus of showing what books, accounts and records are usually kept in relation to the business conducted by the transferor, and, relatedly, what is required to discharge that onus. The Court considered the decision of Re Nancarrow, an Insolvent [1916] SALR 198. In the primary hearing His Honor was considered to have erred in the application of s 128B(5) of the Bankruptcy Act. This was because:
no finding was made about the business carried on by Mr Do at the time of the FY13 Transfers;
no evidence was led by the Trustees and, it follows, no finding was or could be made about the types of records that are usual and proper in relation to such a business;
in the absence of those findings it was not possible to make any finding about whether Mr Do had failed to keep the books and accounts that are required by s128B(5)(a) or, having kept them, had failed to preserve them; and
in the absence of a factual inquiry as to Mr Do’s usual business, his lack of recollection and the absence of information were not relevant to the question of whether the presumption in s 128B(5) arose.
It was therefore concluded that there was no proper basis on which a finding could be made that the rebuttable presumption in s 128B(5) of the Act arose in relation to Mr Do.
Issue 2
The court considered the primary Judge’s reasons in his judgement. The first was His Honour found the requisite standard for keeping financial records was objective, and viewed objectively, that Mr Do’s evidence was inaccurate/unreliable. The Court found a number of errors in the primary Judgement:
- The primary judge referred to s 128B(5) of the Bankruptcy Act as a deeming provision. The Court found the provision was not of that nature.
- The primary judge, in treating s 128B(5) as a deeming provision, His Honour found that the “requirements” of the provision had been “satisfied”.
- The primary judge had reproduced the parties’ submission in their entirety and in doing so it was unclear, given the context, whether he was referring to all of the submission or only the part addressing whether the presumption arose.
Issue 3
This issue was considered by the Court to be unnecessary to address, as the issue and associated appeal grounds were raised in the alternative and only arose in the event that Mr Do and Do Construction failed on Issue 2.
Issue 4
The Court stated that “His Honour’s reasons do not permit us to infer that Mr Do’s evidence and submissions were considered. Had they been, the primary judge ought to have found, based on the available evidence, that Mr Do was able to pay his debts as and when they fell due at the time of the FY13 Transfers. Assuming it arose, that evidence was sufficient to rebut the presumption of insolvency in s 128B(5) of the Bankruptcy Act such that ground 5 of Mr Do’s appeal and, to the extent it arises, the balance of ground 4 of Do Construction’s appeal are made out.”
Decision
Markovic, Halley and Goodman JJ concluded that the appeals should be allowed, and the declaration and orders made by the primary judge in relation to the FY13 Transfers should be set aside and in lieu thereof orders should be made that are limited to the transfers made by or on behalf of Mr Do to the Andrews
Superannuation Fund in the financial years ended 30 June 2014 and 30 June 2015. In addition, the Trustees’ notices of contention should be dismissed. As the Trustees have been unsuccessful they should pay Mr Do’s and Do Construction’s costs of the appeals and of the notices of contention.