McMillan v Warner (Trustee)

McMillan v Warner (Trustee) was an appeal against a decision made by the Federal Court of Australia regarding a property transfer made by Mr Brian McMillan, who later became bankrupt. The appellant, Anthony John Warner, as trustee in bankruptcy of Mr McMillan's estate, sought to set aside the transfer of a property to Ms Karin Elisabeth McMillan, Mr McMillan's wife, on the grounds that it was a transaction entered into to defeat creditors in contravention of the Bankruptcy Act 1966 (Cth). The central issue before the court was whether the primary judge had correctly inferred that Mr McMillan's main purpose in transferring the property was to hinder or delay the division of his assets among creditors or to prevent the property from becoming divisible among creditors.

The court found that the primary judge had erred in concluding that it was a reasonable and definite inference that Mr McMillan's primary purpose in making the property transfer was to defeat his creditors. The court held that the inference drawn by the primary judge was not supported by the evidence, as there were other equally compelling inferences that could be drawn from the circumstances surrounding the transfer. Notably, the court acknowledged that Mr McMillan's explanation for the transfer, which was rejected by the primary judge, was supported by the objective circumstances that Rolls-Royce had advised there was an "absence of financial separation" between Mr McMillan's personal finances and his business. The court also held that the primary judge's adverse credibility finding against Mr McMillan was not supported by the evidence and that the primary judge had made findings that went outside the pleaded case.

In light of these findings, the court allowed the appeal, set aside the orders made by the Court on 9 February 2021, and ordered that the application be dismissed. The court also ordered that the respondent, Anthony John Warner, pay the appellant's costs of the appeal and the costs of the respondent, Karin Elisabeth McMillan. The court's decision highlights the importance of drawing reasonable and definite inferences from the evidence when determining the purpose of a property transfer in bankruptcy proceedings.