Sijabat in her capacity as joint and several trustee for the bankrupt estate of Do v Do in his capacity as a former joint trustee of the Andrew Superannuation Fund
[2021] FedCFamC2G 353
Federal Circuit AND FAMIY Court of Australia
(division 2)Sijabat in her capacity as joint and several trustee for the bankrupt estate of Do v Do in his capacity as a former joint trustee of the Andrew Superannuation Fund [2021] FedCFamC2G 353
File number(s): CAG 74 of 2019 Judgment of: JUDGE W J NEVILLE Date of judgment: 14 December 2021 Catchwords: BANKRUPTCY – Application by trustee in bankruptcy for declaratory and other relief in relation to payments made by the first respondent to his superannuation fund, to the third respondent and in purchasing a property – payments alleged to be contrary to ss. 128B and 128C of the Bankruptcy Act –whether the “main purpose” of the payments and purchase of the property was to defeat creditors – where company of first respondent is in liquidation – where there is almost no business records and evidence regarding payments – submissions and orders sought by the applicant accepted in part – parties to provide short minute of orders sought to give effect to reasons within 14 days – applicant to pay the second respondent’s costs for one part of the claim – first respondent to pay the applicant’s costs in relation to all other aspects of the claim. Legislation: Bankruptcy Act 1966 (Cth) ss 77C, 120, 121, 128B, 128C Civil Law (Property) Act 2006 (Cth) s 239
Corporations Act 2001 (Cth) s 286
Superannuation Industry (Supervision) Act 1993 (Cth) s 43
Cases cited: Australian Securities and Investments Commission v Rich (2005) 191 FLR 385; 216 ALR 320
Australian Securities and Investments Commission v Godfrey (2017) 354 ALR 536
Briginshaw v Briginshaw (1938) 60 CLR 336
Federal Commissioner of Taxation v Consolidated Media Holdings (2012) 250 CLR 503
Jones & Dunkel (1959) 101 CLR 298
Lo Pilato (as Trustee of the property of Adzic (a bankrupt)) v Kamy Saeedi Lawyers Pty Ltd (2017) 249 FCR 69; (2017) 346 ALR 459
Ostrowski v Palmer (2004) 218 CLR 493
The Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278
Warner (Trustee), in the matter of McMillan (Bankrupt) v McMillan [2020] FCA 1759
Division Division 2 General Federal Law Number of paragraphs: 136 Date of hearing: 3 & 4 June 2021 Place: Canberra Counsel for the Applicant Mr J Dooley Solicitor for the Applicant Chamberlains Law Firm Counsel for the First Respondent Mr J K Raftery Solicitor for the First Respondent Roser Lawyers Counsel for the Second Respondent Mr M J Heath Solicitor for the Second Respondent Matthews Folbigg Pty Ltd Third Respondent No appearance ORDERS
CAG74/2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2) BETWEEN: LOUISA MENG LI IN HER CAPACITY AS JOINT AND SEVERAL TRUSTEE FOR THE BANKRUPT ESTATE OF TIEN DUNG DO, ALSO KNOWN AS TEIN DUNG DO SIJABAT
Applicant
AND: TIEN DUNG DO, ALSO KNOWN AS TEIN DUNG DO, IN HIS CAPACITY AS A FORMER JOINT TRUSTEE OF THE ANDREW SUPERANNUATION FUND
First RespondentDO CONSTRUCTION PTY LTD IN ITS CAPACITY AS TRUSTEE OF THE ANDREW SUPERANNUATION FUND ACN 153 972 877
Second RespondentVAN THU NGUYEN TRINH
Third Respondent
order made by:
JUDGE W J NEVILLE
DATE OF ORDER:
14 December 2021
THE COURT ORDERS THAT:
1.Within 14 days of the date of these Orders, the parties are to provide Chambers with Short Minutes of Order to give effect to these reasons.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE W J NEVILLE:
Introduction
The Applicant is one of two joint Trustees of the bankrupt estate of Mr Do. The Applicant Trustee (“the Trustee”) was appointed on 30th September 2016. Mr Do is the First Respondent in this litigation.
The Second Respondent is Do Construction Pty Ltd (“Do Construction”). Since approximately August 2012, that company has been the Trustee of the Andrew Superannuation Fund (“ASF”). Prior to that time, Mr Do was the Trustee of ASF. The Third Respondent, Ms Trinh, was previously married to Mr Do. At one stage, she, too, was a Trustee of ASF. Ms Trinh took no active part in the proceeding. Although now divorced, Mr Do and Ms Trinh live separated under the one roof with the children from their relationship.
In very general terms, with relevant detail provided later in these reasons, the Trustees seek (i) declaratory relief regarding certain payments made into the ASF being contrary to ss.128B and 128C of the Bankruptcy Act 1996 (Cth) (“the Act”), (ii) declaratory relief regarding certain payments made to Ms Trinh, and (iii) declaratory relief regarding the ownership of a property at Gozzard Street, Gungahlin (“the Gozzard Street property”).
Certain other relief was sought, such as the payment of specified sums from, for example, the ASF, to the bankrupt estate. According to the Statement of Claim, filed 12th January 2021, the amount sought to be re-couped from the ASF, totals $463,155.17. According to the proposed draft [amended] Statement of Claim, the sum sought from the ASF actually totals $469,926.
Although already noted, summarised, there are three principal issues in contest:
(a)Payments made by Mr Do into the ASF;
(b)Payments to Ms Trinh; and
(c)Ownership of the Gozzard Street property.
In The Trustees of the Property of Cummins v Cummins (“Cummins”), the High Court said, at [34] (internal citations omitted; emphasis added):[1]
What had been required for the Trustees to succeed at trial was that the circumstances appearing in the evidence gave rise to a reasonable and definite inference, not merely to conflicting inferences of equal degree of probability, that, in making the August transactions, Mr Cummins had the "main purpose" required by the statute. Further, counsel for the Trustees accepted that, in determining the inferences to be drawn from the primary facts, regard was to be had to the seriousness of the allegations made against Mr Cummins (although he was not a party) and the gravity of the consequences of findings adverse to him. Reference was made to the well-known judgment of Dixon J in Briginshaw v Briginshaw.
[1] The Trustees of the Property of Cummins v Cummins (2006) 227 CLR 278 (“Cummins”). The well-known reference in the quote here from Cummins is to the outline of principle by Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362.
In my view, the highlighted text from Cummins aptly describes the state of some of the evidence (documentary and oral) in the current proceeding such that (subject to what is said later in these reasons) there was, and is, no relevant “reasonable and definite inference” applicable and available, at least in relation to the Gozzard Street property, but rather “conflicting inferences of equal degree of probability” in relation to this part of the claim made by the Trustees. Relief in relation to that property must be refused.
By way of summary, for the reasons that follow, in the light of all the evidence, the following relief should be granted:
(a)In relation to the Gozzard Street property, the Trustee has not relevantly proved the case against Mr Do. Accordingly, in relation to that part of the claim, it must be dismissed and the Applicant is to pay Mr Do’s costs either as agreed or taxed;
(b)In relation to each of the other claims against Mr Do, the Trustee has relevantly established each of those claims against Mr Do. He is to pay the Applicant’s costs either as agreed or taxed;
(c)Within 14 days, the parties are to provide the Court with a Minute of Orders to give effect to these reasons.
Background
Paragraphs 5 – 25 of the Statement of Claim (“SOC”), filed 12th January 2021, fairly provide relevant factual background to the claims set out below. With few qualifications, and even fewer formal denials, in their respective Defences to the SOC, the First and Second Respondents admitted the correctness of the facts set out in the paragraphs referred to.[2] The paragraphs mentioned are as follows:
[2] The First Respondent’s Defence was filed on 8th February 2021; the Second Respondent’s Defence was filed on 5th February 2021.
Background
5. On or about 22 March 2004:
a. Gungahlin Market Place Dental Centre Pty Ltd ACN 108 443 974 (Gungahlin Dental) was incorporated; and
b. Mr Do was appointed the sole director of Gungahlin Dental.
6. On or about 18 June 2004, Gungahlin Dental entered into a commercial lease with Goongarline Properties Pty Ltd ACN 098 262 938 (Goongarline) at the premises known as Suite 1.6, Gungahlin Marketplace ACT (Premises) for the operation of a dental surgery from the Premises (Lease).
Particulars
Lease between Goongarline and Gungahlin Dental 18 June 2004
7. The Lease was wholly in writing and Mr Do guaranteed the Lease.
8. The Lease was entered into for a period of 10 years commencing 1 August 2004 and ending 31 July 2014.
9. On or about 22 April 2009:
a. A Trustful Builder Pty Ltd ACN 136 708 837 (ATB) was incorporated; and
b. Mr Do was appointed the sole director of ATB.
10. In or about 2010, Gungahlin Dental ceased trading from the Premises.
11. On or about 24 October 2011, ATB was placed into liquidation.
12. On or about 27 October 2011:
a. Do Construction Pty Ltd ACN 153 972 877 (Do Construction) was incorporated; and
b. Mr Do was appointed sole director of Do Construction.
13. On or about 19 July 2012 and 24 August 2012, the Liquidator of ATB conducted public examinations of Mr Do (ATB Examinations).
14. At the ATB Examinations, Counsel for the Liquidator explicitly stated that his client was assessing the recoverability of any claim he may make against Mr Do.
Particulars
Page 37 of the transcript of the ATB Examinations on 24 August 2012
15. From on or about 23 March 2013 to on or about 5 July 2013, Goongarline issues correspondence to Mr Do regarding breaches of the Lease by Gungahlin Dental.
16. On or about 23 December 2013, the Liquidator of ATB commenced proceedings against the Mr Do in the Federal Court of Australia.
17. Mr Do appears to have been unemployed or is not known to have been employed from at least about 2014 to the present day.
18. On or about 18 August 2014, Mr Do issued an email to the solicitors for Goongarline stating that he did not have any income and is currently living on debts
Particulars
Email from Mr Do to Minter Ellison received on 18 August 2014
19. In or about 2014, Goongarline commenced proceedings in the Magistrates Court of the Australian Capital Territory (proceedings CL 17 of 2014) against Mr Do with respect to breaches of the lease.
20. On or about 7 July 2015, an order was entered in the Magistrates Court of the Australian Capital Territory proceedings CL 17 of 2014 for Mr Do to pay the sum of $50,000.00 to Goongarline (Goongarline Debt) with respect to the breaches of the Lease.
21. On or about 13 May 2016, Goongarline served a bankruptcy notice on Mr Do.
22. On or about 27 July 2016, Goongarline filed a creditor’s petition in Federal Circuit Court proceedings CAG48/2016 with respect to the Goongarline Debt.
23. On 30 September 2016, the Applicants were appointed Trustees of the Bankrupt Estate of Tien Dung Do, also known as Tein Dung Do, Administration Number ACT 128/16/4 (Bankrupt Estate) in Federal Circuit Court of Australia proceedings CAG48/2016
24. By virtue of [7] to [23] above, in or about 2010 onwards and at all relevant times Mr Do was insolvent or in the alternative was about to become insolvent.
25. On or about 9 May 2018, Mr Do was examined by the Applicants pursuant to section 77C of the Bankruptcy Act 1996 (Cth) (Act) (Applicants’ Examination).
Section 128B of the Act relevantly provides:
Transfers that are void
(1) 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 is made by way of a contribution to an eligible superannuation plan; and
(b) the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and
(c) the transferor’s main purpose in making the transfer was:
(i) to prevent the transferred property from becoming divisible among the transferor’s creditors; or
(ii) to hinder or delay the process of making property available for division among the transferor’s creditors; and
(d) the transfer occurs on or after 28 July 2006.
Showing the transferor’s main purpose in making a transfer
(2) The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(c) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.
(3) In determining whether the transferor’s main purpose in making the transfer was the purpose described in paragraph (1)(c), regard must be had to:
(a) whether, during any period ending before the transfer, the transferor had established a pattern of making contributions to one or more eligible superannuation plans; and
(b) if so, whether the transfer, when considered in the light of that pattern, is out of character.
Other ways of showing the transferor’s main purpose in making a transfer
(4) Subsections (2) and (3) do not limit the ways of establishing the transferor’s main purpose in making a transfer.
Rebuttable presumption of insolvency
(5) For the purposes of this section, a rebuttable presumption arises that the transferor was, or was about to become, insolvent at the time of the transfer if it is established that the transferor:
(a) had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor’s business transactions and financial position; or
(b) having kept such books, accounts and records, has not preserved them.
Claims & Pleadings
As pleaded, the claims against the Respondents fall into two categories:
(a)Transfers of funds, and instances of undervalued transactions, alleged to have had the purpose and intent to defeat creditors, contrary to ss.128B and/or ss.128C of the Act. The transferees of these transactions were said to be ASF and Ms Trinh; and
(b)The Applicant contended that purchase of the Gozzard Street property in January 2010 should be impugned because, as of the date of their Appointment as Trustees of the Bankrupt’s estate on 30th September 2016, this property vested in them. The Applicant contended that Mr Do purchased this property in his personal capacity. In the alternative, they contended that he purchased it in his capacity as Trustee of the ASF.
The Applicant contended, and pleaded at par.24 of the SOC, that “in or about 2010 onwards and at all relevant times Mr Do was insolvent or in the alternative was about to become insolvent.” At par.24 of his Defence, Mr Do denied that he was insolvent and that “the First Respondent did have incomes [sic] and paid taxes since 2010.” The Second Respondent likewise did not admit the claim of insolvency against Mr Do.
At par.26, the Applicant pleaded that: “By virtue of the Applicants’ findings at the Applicant’s Examination, at all relevant times Mr Do has failed to keep such books, accounts and records as are usual and proper in relation to his examinable affairs.”
Mr Do was examined by the Applicant on 9th May 2018, pursuant to s.77C of the Act. In his Defence, Mr Do did not admit the contentions set out in par.26, saying that he provided the Applicant with what records and books he had available to him. He also pleaded that he gave the Applicant relevant contact details of his lawyers, accountant and real estate agent.
Summarised, there were four impugned transfers alleged against Mr Do involving the alleged transfer of funds. The further claim pleaded against him involved the purchase and ownership of the Gozzard Street property. Relevant details from the SOC, and from the respective Defences of the First and Second Respondents, were as follows:
(i) As per pars.31 – 37 of the SOC, during the financial year ending 30th June 2013, payments were made by or on behalf of Mr Do into the ASF that totalled $430,996.17 (“the 2013 Transfers”). There was a general reference (at par.31) to the details of these payments being disclosed in the Annual Return for ASF;
(ii) As per pars.38 – 44 of the SOC, during the financial year ending 30th June 2014, payments were made by or on behalf of Mr Do into the ASF that totalled $7,159 (“the 2014 Transfers”). Here, the Applicants relied upon Mr Do’s income tax return for that year;
(iii) As per pars.45 – 51 of the SOC, during the financial year ending 30th June 2015, payments were made by or on behalf of Mr Do into the ASF that totalled $25,000 (“the 2015 Transfers”). Again, the Applicants here relied upon Mr Do’s income tax return for that year;
(iv) In relation to the first two of these three claims – the 2013 and 2014 Transfers – Mr Do pleaded in his Defence that the funds contributed to the ASF were from his “after-tax money”;[3] Mr Do relevantly denied pars.47 – 51 of the SOC regarding the 2015 Transfers;
(v) In relation to the same claims of alleged liability in the paragraphs noted above, the Second Respondent denied (or did not admit) the matters there pleaded;
(vi) As per pars.52 – 55, the Applicant pleaded that on or about 28th July 2015, Mr Do made payments to the Third Respondent (Ms Trinh), which totalled $30,000 (“the Third Respondent Transfers”). Particulars in this regard were taken from a specified account held by Mr Do with the National Australia Bank. The Applicant contended that these transfers were made without any consideration being provided by the Third Respondent;
(vii) Mr Do denied this claim involving Ms Trinh, and pleaded in his Defence (par.52) that the money put into Ms Trinh’s account was not his but her own money;
(viii)The final claim (pars.56 – 59) contended that on or about 22nd January 2010, Mr Do purchased a unit known as 4/38 Gozzard Street, Gungahlin (“the Gozzard Street property”). It was contended that it was purchased in his personal capacity. In the alternative, it was pleaded that the property was purchased in Mr Do’s capacity as Trustee of the ASF. It was said that he used his own funds to make this purchase. It was further said that, as a result of the alternative pleading, a resulting trust was created in favour of Mr Do, and that he (or alternatively the ASF) held the property as Trustee for the resulting trust. Par.58 pleaded that Mr Do was the registered proprietor and beneficial owner of the property until 30th September 2016. On that date, the Applicant aver that the property vested in them;
(ix) In his Defence (pars.56 – 59), Mr Do confirmed that the Gozzard Street property was purchased but only in his capacity as Trustee of the ASF; he denied that there was any resulting trust created as alleged by the Applicant, and that while he was the registered proprietor of the property, Mr Do denied that he was or is the beneficial owner of this property. The Second Respondent, the ASF, pleaded in terms similar to Mr Do.
[3] See pars.31 and 38 of his Defence.
Summarised further, the impugned transactions, as pleaded, involved financial transfers by Mr Do in for the financial years ending in 2013, 2014, and 2015, plus a transfer of funds in July 2015 to Ms Trinh. The transfer to Ms Trinh, called “the Third Respondent Transfers” in the SOC, I will call simply for ease of reference and relevant distinction, the “Trinh transfer.”
As at the date of the hearing in this matter, there were multiple Applications, many of them either procedural and/or which were overtaken by later Applications. For completeness under this heading of “Claims and Pleadings”, I should note summarily the following more procedural Applications:
(a)On 23rd April 2021, Mr Do filed an Application in a Case by which he sought various procedural Orders, a number of which were, in effect, to seek discovery of certain documents from the Applicant, as well as certain relief from the burden of the documents that he had already received. He stated, for example (par.4 of the Application) that the Applicant had provided a Dropbox link on or around 13th April 2021 (which was some 3 weeks or so after the date specified in the Court’s Orders). The Dropbox contained 3953 pages, which Mr Do said (perhaps not unreasonably) was (in my words) too much for him properly to consider in the limited time until the hearing that was scheduled to commence on 4th June 2021. In effect Mr Do was seeking some extension of time to allow him to consider the large number of documents provided to him.
(b)On 25th May 2021, the Applicant filed an Application in a Case by which they sought to amend the SOC to include a claim, and seek relief, under s.239 of the Civil Law (Property) Act 2006 (ACT) in relation to the Gozzard Street property;
The Applicants’ Evidence
As earlier noted, there are two Trustees of the First Respondent’s bankrupt estate. The first-named of these is Ms Louisa Meng Li Sijabat. She filed two Affidavits, on 28th October 2019 and 1st April 2021. At the hearing, her Counsel confirmed that she relied only upon the first Affidavit, filed 28th October 2019.[4] Neither of the Trustees gave oral evidence. From the first Affidavit, I note the following.
[4] See Transcript (3rd June 2020) pp.2 & 10. Hereafter “T” followed by relevant page number. The second Trustee, Mr Combis, did not file any material in the proceeding.
At pars.6 – 22 of her first Affidavit, Ms Sijabat set out the background to Mr Do’s bankruptcy. This included that on or around 18th June 2004, Gungahlin Market Place Dental Centre (Gungahlin Dental Centre), as lessee, entered into a lease with Goongarline Properties Pty Ltd (“Goongarline”), as landlord. Crucially as things turned out, Mr Do was the guarantor of a sublease of Suite 1.6 for the operation of a dental surgery. The lease was for 10 years, commencing on 1st August 2004. Ms Trinh was the Wife of Mr Do and worked as a dentist at Gungahlin Dental Centre.
In approximately mid-2010, Gungahlin Dental Centre ceased trading at Suite 1.6. There was significant correspondence between Mr Do and the Centre Management of Goongarline, some of which is referred to below in the course of dealing with Mr Do’s cross examination. That correspondence continued between March and July 2013 (see Tab10 of LS1, being a folder of Exhibits to the Trustee’s Affidavit).
On or about 7th July 2015 an Order was made in the Magistrates Court of the ACT for Mr Do to pay to the Landlord $50,000. On or about 13th May 2016, the Landlord served Mr Do with a Bankruptcy Notice (“BN”). Mr Do failed to comply with the BN. The Landlord commenced proceedings in this Court seeking a sequestration Order pursuant to s.43 of the Act.[5]
[5] A copy of the creditor’s petition is at Tab13 of LS1.
On 30th September 2016, Ms Sijabat and Mr Combis were appointed Trustees of Mr Do’s Estate.
On or about 1st October 2009, a self-managed superannuation fund was created by way of deed. That fund, leaving aside questions of incorrect or different spelling, was known as the ASF as noted earlier in these reasons. Mr Do and Ms Trinh were named as members and Trustees of the Fund. Clause 44 of that Deed, a copy of which is at Tab 3 of LS1, requires the Trustees of the ASF to act jointly. On or about 2nd October 2009 there was a meeting of the Trustees, with Mr Do and Ms Trinh present. The Minutes of that meeting are dated 6th October 2009; a copy of those Minutes is at Tab5 of LS1.
On 24th October 2011, the Respondent’s company, A Trustful Builder Pty Ltd (“ATB”) was placed in liquidation. Mr Do was the sole director of that company. The Liquidator of ATB (“the Liquidator”) conducted a public examination of Mr Do in July and August 2012. The transcripts from that examination is at Tab 8 of LS1. Counsel for the Liquidator of ATB indicated at the examination that the Liquidator was considering taking action to recover funds from Mr Do, however, no such action has ever eventuated. Action in the Federal Court of Australia was initiated against Mr Do by the Liquidator on 23rd December 2013 regarding breach of director’s duty.
On 29th August 2012, Mr Do and Ms Trinh agreed to terms to resolve their family law property proceedings. Orders were made in the Family Court of Australia. A copy of the property Orders in those proceedings is at Tab 10 of LS1.
Pars.18 – 20 of Ms Sijabat’s Affidavit should be noted in particular. They aver that:
(a)Despite the amount owing to the landlord, and other outstanding claims, and notwithstanding that Mr Do claimed to be unemployed, he still managed in each of the financial years ending in June 2013, 2014 and 2015, and in July 2015, to make voluntary contributions into ASF that totalled $483,905.17;
(b)In his examination, Mr Do gave evidence that he did not know from where the $430,996.17 (the payment made at the end of the financial year 2013) came;
(c)His tax returns for the years mentioned are at Tab 11 of LS1.
There was no reply by Mr Do to the Trustees’ letter of 9th December 2016 regarding his continuing failure to provide a Statement of Affairs (“SOA”) until 15th March 2017. The SOA is a Tab 1 of LS2. In the same document, Mr Do said that he separated from Ms Trinh in 2010.
Regarding the Gozzard Street property pars.26 – 43, Ms Sijabat said that Mr Do entered into an agreement for the purchase of this property on 22nd January 2010. The purchaser named in this Contract was styled as “Tien Dung Do as Trustee for the Andrew Superannuation Fund.” Various documents relating to this purchase are at Tab 16 of LS1, including the first page of the Contract, and the Transfer.
Ms Sijabat noted that notwithstanding that the ASF trust deed did not permit the Trustees to act severally, there was no mention of Ms Trinh in any of the documentation regarding this property. Ms Sijabat confirmed that a bank account in the name of the ASF was opened on 22nd February 2012. However, notwithstanding “numerous requests”, no bank statements have been provided by Mr Do regarding the source of funds to purchase the Gozzard Street property.
Formerly, Do Construction was the Trustee of ASF. As already noted, Mr Do was the sole director of that company. Various information was sought from Do Construction regarding, for example, the tenancy agreement between that company and the tenants. This documentation is at Tabs 19 and 20 of LS1.
The property manager of the Gozzard Street property was Steele Properties Pty Ltd (“Steele”). The Trustees sought information from Steele and in particular that any rental payments should be made into the personal insolvency account for the Bankrupt Estate. Mr Do and Ms Trinh were, respectively, a director and shareholder of Steele. Steele responded to the Trustees confirming that it was no longer the property manager of Gozzard Street. No documents as sought were provided by Steele.
On 1st May 2017, the Trustees received an “owner ledger” from the current property manager of Gozzard Street, Whittles Strata Partners, which confirmed that Mr Do was the owner of that business. The documents confirming these matters are at Tab 23 of LS1.
There were various other matters raised by the Trustees regarding the operations and dealings of ASF, which I need not detail other than simply to refer to pars.34 – 36.
At par.37 of this Affidavit, Ms Sijabat said that in the course of his examination [on 9th May 2018 by the Trustees], Mr Do said that Do Construction was appointed Trustee of ASF. Other details as to when this occurred were not forthcoming.[6] Nor was there any deed of appointment, variation or any other document provided to the Trustees. Ms Sijabat confirmed that Ms Trinh was not a director of Do Construction, in contravention of the Superannuation Industry (Supervision) Act 1993 (Cth).
[6] The Transcript of Mr Do’s examination was at Tab 12 of LS1.
On 8th August 2018, Ms Sijabat wrote to Mr Do alleging that the amount of $463,155.17 had been transferred into the ASF for the purpose of defeating creditors, pursuant to s.128B of the Act. She invited Mr Do to respond to the contention that he was and remained the registered proprietor and beneficial owner of the Gozzard Street property in his personal capacity, or that ASF was the beneficial owner of it. The correspondence referred to is at Tabs 3 and 26 of LS1. No relevant documents or responses came from Mr Do.
The lack of information and documents from Mr Do led Ms Sijabat to state (par.43) that she was unable to conclusively ascertain whether the Gozzard Street property was purchased by Mr Do in his own name, in accordance with the Trust Deed for the ASF, with Mr Do’s own personal funds, or the funds of ASF. All of this said, at the outset of the hearing, after brief discussion, Counsel for the Trustee acknowledged that Mr Do purchased the Gozzard Street property as Trustee of the ASF.[7]
[7] See T 24 – 25.
As well, the conveyancing file from the lawyers who acted on the purchase of the Gozzard Street property became Exhibit PR1. That file further confirmed that Mr Do purchased the property in his capacity as Trustee of the ASF.
Subject to what is said later in these reasons, the general, and specific, lack of information and lack of documents provided by Mr Do (as well as his regular periods of inexplicable silence) certainly made his case much more difficult, and caused the Court significant disquiet and concern, as it also obviously did the Trustee.
First Respondent’s evidence
Summarised, Mr Do’s evidence was as follows.
He confirmed that between 2000 and 2007 he had worked in the Commonwealth Department of Defence. His salary, he agreed, was in the range from approximately $36,000 until he was earning at the end of his time with the Department of Defence approximately $66,000.
Turning to other matters, he also confirmed that the 10 year lease on the dental practice in which his then Wife (Ms Trinh) worked commenced in 2004. That practice was conducted through a company styled “Gungahlin Marketplace Dental Centre Pty Ltd”. While he acknowledged that there existed a guarantee by which he guaranteed the payment of monies due under the lease, he said that he did not fully understand his obligations under it. He seemed also to suggest that his lawyers at the time did not (or may have not) ensured that he completely understood his obligations under the guarantee. He suggested too that because the dental practice was his first business [after leaving the public service] he likely did not fully understand his obligations more generally.[8] For my part, I had the reasonably strong impression that these (and some other) comments, were quite coloured with the benefit of hindsight.
[8] T 27 – 28.
A company Mr Do established in 2009, A Trustful Builder Pty Ltd (“ATB”), was the vehicle through which a residence at Elizabeth Jolley Crescent was built in approximately 2012. He continues to reside there, separated from his former Wife under the one roof, with his children. ATB’s only other project was to build a property for his Father-in-law.
Mr Do was shown a letter, dated 12th August 2010, from the landlord at which the dental practice was conducted. It was addressed to Ms Trinh. The letter recorded that it had come to the attention of the landlord that the dental practice was no longer trading.[9] For the first of a number of times throughout his oral evidence regarding what he did or did not recall, Mr Do said that he had never seen this letter. It will be recalled from the material referred to earlier in these reasons, Mr Do and his Wife did not resolve at least their property proceedings until August 2012.
[9] Relevant correspondence is found behind Tab 6 in LS1. See also the correspondence at Tabs 1 and 2 in the “Bundle of Documents” that became the Applicant’s Exhibit A.
Whatever Mr Do did or did not recall – the correspondence speaks for itself; he confirmed that at that time (in 2010) he was seeking to sub-lease the premises so that, in his words, the “landlord won’t financially suffer.” Put another way, he wanted to “negotiate out the arrangement.”[10] Mr Do said that he was really only involved in arranging for maintenance and liaising with management in this regard. He said that he was not involved in the running of the dental business. He said that he thought the dental practice finally closed in 2013 after its “temporary closure” in 2010.
[10] T 30 – 31.
On this and a number of other matters, I was surprised by, and not wholly convinced of, Mr Do’s claimed lack of knowledge of a number of the “nuts and bolts” of the dental practice and its operations. Having entered the lease and become a guarantor under it, and being an engineer by profession, I have difficulty comprehending that Mr Do would be so incurious, and incautious, about his responsibilities.
His lack of knowledge continued when he commented that he had no idea, and no knowledge of the patients or income from the dental practice. He stated more than once that he was not involved in the money side of the dental practice. Mr Do also stated that he did not know that under the guarantee he signed if the dental practice was not, or did not, make payments to the landlord under the lease, he would become liable.
Mr Do consistently contended that the closure of the dental practice in 2010 was only “temporary”. The correspondence he was taken to in the Bundle of Documents (Exhibit A), at pp.14 – 15, confirm him writing to the Manager of the complex in which the dental practice formerly operated. This documentation is dated November 2012. Mr Do maintained however that he had no idea about how “temporary” the closure was, even in circumstances where his own correspondence in November 2012 confirmed his knowledge of some relevant detail at least two years after the original closure.
Yet still, notwithstanding the detail in this correspondence in November 2012, Mr Do contended that (a) he was not the primary contact between the landlord and the dental practice, and (b) he did not know who the primary contact was. His involvement was only in relation to issues of maintenance “or something like that.”[11] He said that his “ex”, meaning Ms Trinh, was running things in all other respects. He confirmed that they were still living under the one roof at the residence in Elizabeth Jolley Crescent. He also confirmed, as set out in the email dated 19th November 2012 (p.15 of the Applicant’s Bundle of Documents), that (a) “we have moved out of the above tenancy”, and (b) “we are currently assessing our business situation to work out rent figures and options”. He proposed three possible options in relation to the existing lease.
[11] T 37 – 38.
Even though Mr Do confirmed in the email referred to that “we are currently assessing our business situation” his responses under cross examination were less than illuminating, if not decidedly opaque, and regularly unresponsive, thus:[12]
MR DOOLEY: I withdraw the question. You discussed with Ms Trinh how the dental practice was proceeding with respect to its continuity and how the lease could be – and options in respect to the lease. Would you agree with that?‑‑‑What I could say there is sometimes I – the lease, because ..... with my company so when I discussed – negotiate with the landlord – so I negotiate with the landlord. Now, it’s only in terms of like – in terms of – of terms – or I tried to get different ..... operators to go into – to sublease the premises, but the landlord refused that.
And you were aware of exactly what was happening with the dental practice, weren’t you?‑‑‑In what sense do you mean? Like, I know the – exactly what the dental business – I would say before that I had no idea about the – the patient flow, I don’t know exactly, you know, but that – things like that.
But you knew whether it was open or closed; right?‑‑‑I don’t know the – when they closed, the hours they closed or the hours they opened. I don’t know.
Mr Do, that answer you’ve just given is false, isn’t it?‑‑‑Sorry, what did you say?
The answer you’ve just given, that you didn’t know when it was open or closed or the hours it was open or closed is false, do you agree?‑‑‑No, I’m saying I don’t know fully about when the – the – exactly when they closed, when they opened. That’s what I’m saying.
HIS HONOUR: But when you say that you don’t know fully, does that mean that you know generally?‑‑‑Yes.
Right?‑‑‑Because I’m not the one who carries the instruction when they opened. I’m not the one who give the instruction when they close, when they open, how many hours. No. I’m not involved in that aspect.
[12] T 38 – 39.
Mr Do initially confirmed that the company that signed the lease in relation to the dental practice was de-registered on 14th August 2011, but then said that he did not know that it had been de-registered. He said that de-registration occurred because of the inactivity of the company. He maintained that he did not know that the dental practice had ceased trading in 2011. This was repeated multiple times.[13] His lack of knowledge was, at least, surprising, rather curious, as well as troubling.
[13] See T 43 – 44.
Mr Do confirmed that he received a letter from the Liquidator of ATB, dated 3rd November 2011.[14] That letter alleged a breach of director’s duty on his part. As was often the case, Mr Do could not or would not agree to the actual date of the correspondence even though it was in front of him. His regular doubt seemed often to be based upon an assumption that he had to recall clearly and directly the question or fact or document that was being put to him.
[14] Ibid.
He acknowledged that in relation to his personal exposure to the Liquidator he may be liable (in his view) for a possible amount of approximately $7,000. He said that, at that time, he could “fully fund” that amount and the legal fees that would arise in relation to defending the claim. He said he did not think that it was a major risk that he was facing. What was somewhat curious in Mr Do’s responses here was the fact that he regularly referred to “we” were preparing to engage a lawyer in relation to this claim. The curiosity was and remains who, in fact, was intended to be referred to by the “we”, especially in circumstances where he also consistently denied knowledge of whatever his then wife (Ms Trinh) was engaged in and or whether or not she was otherwise involved in this specific claim.
Next, Mr Do was taken to a Commonwealth Bank of Australia (“CBA”) account that was opened after 3rd November 2011. He was provided with a copy of a CBA Bank Statement, which began with a date 18th November 2011. It is an account with a number ending in 8518. There was an entry dated 6th December 2011, which referred to a deposit, by cheque, of $262,500.45. He was asked whether or not he knew what this sum referred to. He said that this money referred to funds that were paid to him for the construction of the house at Elizabeth Jolley Crescent which he said he was building for his “ex” (Ms Trinh). Alternatively, he said, the money could have come to him through the “family court consent settlement”. He repeated a number of times that these were his two sources of “income” (a) monies being paid to him for the construction of the Elizabeth Jolley Crescent property or (b) courtesy of the property Orders made in the Family Court.[15] Mr Do confirmed that the CBA bank account was his personal account and not one relating to ATB.
[15] See T45 – 46.
When it was put to Mr DO that the money was not paid in relation to the construction of the Elizabeth Jolley Crescent property because it was transferred to his personal account rather than to the ATB account, he further explained that money was paid by his “ex” to ATB for the construction of the property but also contended that money came from his “ex” in the form of personal sums of money “to pay other things when this … or suitable payment requirements … were required at that time.”[16]
[16] See T47 where there is a more extended discussion regarding monies that may have been received from Ms Trinh, and Mr Do’s inability, at times, to distinguish between payments to him personally and payments to ATB for construction.
Mr Do was taken to another item in the CBA Statement where the next line item showed a deposit, by “direct credit” from LJ Hooker at Kaleen of $41,329. He was asked whether or not he could explain where this sum came from or what it related to. He said he could not recall. Mr Do was further asked about another withdrawal of $240,000. That transaction has words next to it of “selling house.” He said he could not recall what this referred or what this sum related to. He said he had no documents in relation to these amounts after this amount of time.[17]
[17] These bank statements are annexed to Mr Do’s Affidavit, annexure TD1, commencing at p.174.
Mr Do was then taken to a series of further entries in his bank statements, beginning with the sum of $546,098.31 paid into his account on 5th April 2012. He had no relevant information, or recollection, of anything to do with this sum. His response was not illuminating:[18]
Could you please turn to page 177. Can you see an entry about seven lines down 5 April for a $546,000 – sorry – $546,098.31? Do you see that?‑‑‑Yes.
Do you know what that was?‑‑‑I see the – the amount there on that day into my account there but I could not recall whether it come from a term deposit or – or from interest earning account or the source of it. I – I could not recall now. But in – anything into my account it would be my money at that point in time or for the construction of the Franklin property there of my .....yes. That’s – that’s all I could say.
And do you have any documents which cast light on that transaction?‑‑‑This is my personal account so I don’t have any record now.
[18] T 49 – 50. The relevant bank statement is at p.177 of Mr Do’s trial Affidavit.
The following somewhat lengthy exchanges regarding various other deposits and withdrawals from his personal CBA account were unfortunately typical of the complete lack of recall by Mr Do, and lack of supporting documentation, regarding his financial affairs (emphasis added):[19]
[19] T 50 – 52.
Can you see two lines further down a deposit of $20,084? See that?‑‑‑Yes.
Do you know what that amount is referable to?‑‑‑That amount there is from the – from – from the description, it – it could be from LJ Hooker there transferred to me.
Do you recall though sitting here today or can you cast light on sitting here today what that amount is referable to apart from the fact that it seems to have been from LJ Hooker?‑‑‑ ..... I could say there is that $20,000 go into my personal account and in terms of – in terms of tax purposes, I have to refer to my accountant. They – they look after – you know, how they do the booking and that for me.
HIS HONOUR: But – I’m sorry, but this is not the first time that LJ Hooker has put money into your account; correct? Because there was an earlier reference on 6 December – sorry – yes – on 6 December which is at page 174 ‑ ‑ ‑?‑‑‑174.
‑ ‑ ‑ which Mr Dooley took you to earlier?‑‑‑That’s right. There – there – that ..... from LJ Hooker ‑ ‑ ‑
But ‑ ‑ ‑?‑‑‑ ‑ ‑ ‑ transferred in – into my personal account. Yes.
But you have no recollection why LJ Hooker would have been putting money in your account?‑‑‑I don’t know exactly but I know that ‑ ‑ ‑
Well ‑ ‑ ‑?‑‑‑ ‑ ‑ ‑ it could be related to the deposit of that – that there – that – that – that property there on 139 Franklin.
But where would the money have been coming from? Why would they be putting money in your account? A real estate agency, why would they be putting money in your account?‑‑‑I could not remember specifically what – what in terms of the – in terms of the tax transaction of payment expenses. This could be part of my – my wages. It could be they’re paying through to me a personal account and the – the – the – the ..... new account. That’s – that’s the wages or could be go to my account. What is that back there is ..... there. Yes. That’s right. I – I don’t think this is – this transaction here, 139 ..... is – that is ..... that is – this is not about – to the ATB Proprietary Limited. It’s not related to ATB – related.
I’m just asking, a real estate agency, could I suggest, doesn’t usually involved with the payment of your wages because at this time you were working for the Defence Department, weren’t you?‑‑‑I was resigning already.
You had resigned already?‑‑‑I – I had resigned already.
But you can’t think of any reason why you would be getting payments directly from LJ Hooker on 6 December, page 174, then $20,000 – 20,000 plus dollars on 10 April also from LJ Hooker, page 177. I’m just looking for some explanation if you have any as to why you’re getting these not insignificant sums of money paid directly to you by LJ Hooker, that’s all?‑‑‑I’m – I’m not sure what – what – what I can say here is – because the money – if they transfer at that time – that point in time I don’t think ATB is – ATB already in – in the liquidation. So it will not relate to ATB ..... relate to me. So it could be – it could be the reason they transferred to me so I could have the money to pay for the – the – the ongoing expenses on – on that – on that project there could be the reason but I can’t say for 100 per cent sure at – at this stage.
Just seems to be sizeable sums of money from a real estate agency and – and accepting that it was quite some time ago, you can’t offer any explanation for why a real estate agency is paying you these sizeable sums of money; correct?‑‑‑I – I could not recall now. I could not recall now. If – if that – at that point in time I could be able to get the answer.
Yes. No, no. I’m just asking you and if you can’t recall, you can’t recall. Mr Dooley.
MR DOOLEY: Do you have any documents which might cast light on the 10 April payment of $20,084?‑‑‑Sorry, what page number?
Page number 177?‑‑‑Okay.
10 April. And the question was if you have any documents casting light on that payment?‑‑‑I don’t have any personal record there.
Could you please look on that same page three further rows down and on 12 April there is a WDL branch Woden debit being a withdrawal from $590,000. Where did that money go, Mr Do?‑‑‑Could that go into term deposit?
I beg your pardon, sorry?
HIS HONOUR: Into a term deposit.
MR DOOLEY: Term deposit?‑‑‑Term deposit.
Well, is that your answer? I don’t know?‑‑‑That – that’s what I – I – I – I – I could think of because I have – at that time I have term deposits.
And was the term – did you have term deposits with banks?‑‑‑Yes.
Do you have any bank statements for the term deposits for this period?‑‑‑Probably. They – they – they have – they – they give me some receipt or something on that term deposit because that’s – that’s the interest – that’s the – for interest earning. So if that term deposit is – is for interest earnings, like, high interest ..... will be high interest earning so I – I could transfer there into term deposit.
Do you have any documents about any term deposits in respect of that amount on 12 April for $590,000?‑‑‑I could – I could – I could find out that for you. I could find out that for you. I see what I ..... the – the deposit 12 April.
But you don’t – haven’t produced any documents – I withdraw that. Have you produced any documents to the applicants, the Trustees, about a term deposit in respect of that withdrawal of $590,000?‑‑‑No, I haven’t. I haven’t. I – I have to check out a – a thing. I may be able to find out the – whether I have any term deposit from the bank from my personal account there.
Could you go then to page 178, please? And do you see there statement number 3 beginning 19 May 2012? Do you see that?‑‑‑Page 178?
178. Yes. Statement number 3 beginning 19 May 2012?‑‑‑Yes.
And could you go, please, to the 15 June entry being a deposit of $191,794.07. Do you see that?‑‑‑Mmm.
Can you tell his Honour what that was?‑‑‑I could not recall now.
Do you have any documents casting light on that deposit of $191,794.07?
HIS HONOUR: Actually, it obviously refers to it being a transfer than a deposit.
MR DOOLEY: I apologise, your Honour. I withdraw the question. Do you have any documents which cast light on the transfer of 15 June of $191,794.07?‑‑‑I could not recall I have the document or not.
Can you see three lines further down, 27 June there is a debit of $158,612.96. Where did that money go, Mr Do?‑‑‑I could not recall what – what – what the going income coming from – coming out from my account. It could be .... to term deposit earning interest on – for the construction of my ex .....
But you don’t recall sitting here today; is that right?‑‑‑I could not recall.
Do you have any documents casting light on the 27 June debit of $158,612.95?‑‑‑I – I could not recall.
Well, Mr Do, you have documents or you don’t. It’s not really a matter of recollection. Do you have any documents?‑‑‑On that transaction there I don’t have.
The next “item” of cross examination related to Mr Do’s examination by the Liquidator of ATB, which was undertaken on 19th July 2012 in the Federal Court of Australia. The transcript of this examination was at Tab 8 of Ms Sijabat’s Affidavit. The focus here was on whether there were any outstanding personal guarantees that he had given. In answer to questions from the Liquidator in this regard, Mr Do said that there were no such guarantees. He confirmed before this Court, however, that the guarantee in relation to the lease for the dental centre was operational but that he did not recall this at the time of his answer to the Liquidator.[20]
[20] See T 54 – 55.
There was a further examination of Mr Do by the Liquidator on 24th August 2012. During that examination, he confirmed that his home address was the property in Elizabeth Jolley Crescent. He confirmed further that the Liquidator inquired of him of his acknowledgement that he might be sued personally by the Liquidator. Five days after this examination by the Liquidator, Mr Do and Ms Trinh consented to final property Orders that were made in the Family Court of Australia (dated 29th August 2012) pursuant to which the Elizabeth Jolley Crescent property was transferred to Ms Trinh.[21] A copy of those consent Orders (which were executed by the parties on 28th August 2012) is annexed to Ms Sijabat’s Affidavit, Tab 9.
[21] See T 55.
Under those same Orders, there was provision for 100% of the Wife’s superannuation interests in the ASF to be paid or transferred to Mr Do.[22]
[22] Upon checking Court files, the Court was able to advise the parties that the divorce Order ending the marital relationship between the parties was dated 1st March 2019.
Mr Do was then asked about a series of transactions that are recorded in a CBA statement for an account ending in the numbers “4144”, which begins with a date of 28th August 2012. This statement begins at p.182 of the Exhibit to Mr Do’s Affidavit. The first transaction there recorded, and about which Mr Do was asked questions, referred to a cheque deposit of $29,500 on 28th August 2012, and a series of transactions in the same account (recorded on the same page of this Exhibit to the same Affidavit) as follows: on 6th September 2012 a cheque deposit in the sum of $48,441; on 27th September 2012 a “transfer to other bank” of $50,000; on 15th October 2012 a (credit) transfer of $70,000; and two separate entries on 18th and 19th October 2012, both debit transfers, each in the sum of $30,000. In relation to each of these transactions, Mr Do’s answers were essentially the same, namely he had no recollection of what any of these sums of money related to, and he had no documents in relation to any of these transactions.[23] In a similar vein, and in the light of the last entry on p.182 already noted, the transfer is stated to be to “Phi Long Property.” Mr Do said that while he knew the name he had no recollection of what the transfer related to. After many attempts to obtain the basic information regarding it, it seemed that “Phi Long” is a person who owns an unspecified property. Later, he changed his evidence slightly to indicate that “Phi Long” was a company, of which, at some time past, he was a director. He said that it was a “start up company”, but to what end there was no information. He thought that his [former] Wife may have been a director but he did not know. But Mr Do could not shed a glimmer of light on why his bank records would show him transferring $30,000 to this person for some unknown property.[24]
[23] See T 59 – 61.
[24] See T 61 – 63. As pointed out later in the hearing, at p.51 of Exhibit A (Applicant’s Bundle of Documents) there is a reference to “Phi Long Investment Pty Ltd.”
The discussion was less than illuminating. It again showed (a) how lacking in the most basic of recollection Mr Do was regarding the transfer of significant amounts of money into and out of his bank accounts, (b) how poor his record-keeping was, and (c) how totally incurious he seems to have been, and in many ways still is, regarding his financial affairs.
Mr Do was taken next to two entries in the CBA statement on the same account (ending in “4144”) regarding two cash deposits on 13th and 18th December 2012 in the respective sums of $150,000 and $200,000 (the statement is at p.183 of the Exhibit to Mr Do’s Affidavit). They were both cash deposits at the Gungahlin branch of the CBA. These entries were noted at pars.71 – 73 of Mr Do’s Affidavit to be part of the property settlement with Mr Do. Somewhat similarly, there was an earlier entry on the same statement, dated 31st October 2012 of $50,000 (a debit entry to a branch of the CBA at Lansvale in Sydney), which was confirmed to be a contribution to his superannuation.
Mr Do was taken to p.184 of the Exhibit to his Affidavit (another CBA bank statement). The entry in question here was dated 31st January 2013, and recorded a transfer, at a Sydney suburban branch of the CBA, in the sum of $382,767. This sum was transferred to Mr Do’s superannuation fund, the ASF. Mr Do confirmed or agreed with the proposition that he had “entirely gutted the bank account and transferred the totality of the contents of $382,667 into [his] self-managed superannuation on 31 January.”[25] He denied that he did this to ensure that his creditors could not get access to these funds.
[25] T 63. The correct sum withdrawn is actually $382,767.
There followed another batch of questions to Mr Do regarding a further series of transactions as follows: on 28th March 2013 regarding a cheque deposit of $31,000 (p.185 of the Affidavit); on 10th April 2013 regarding a cash deposit for $169,000 (p.186 of Affidavit); on 19th April 2013 a withdrawal of $280,000; on 26th April 2012, a withdrawal of $190,000; and on 29th April 2013, a withdrawal of $24,075.45. Mr Do could not recall anything about any of these transactions; nor could he provide any documents in relation to them.[26]
[26] T 64 – 65.
More by way of confirmation than anything else, it would seem, Mr Do was taken to pp.51 – 55 in the Applicant’s Bundle of Documents (Exhibit A) which, in summary, detailed information sought from him by the Trustee, such as settlement statements and various other financial records. Those pages also provided summaries of the transactions listed above. Again, Mr Do confirmed that apart from advising the name of a lawyer and [some] account names he had no documents or information that he could provide to the Trustee as requested/directed under the Bankruptcy Act.[27]
[27] T 68 – 70. The request/direction, under s.77C(1) of the Act, was dated 29th March 2018. It was sent, and the materials and information sought, was in advance of Mr Do’s appointment for interview/examination by the Official Receiver under s.77C(1).
Questions of Mr Do returned to the negotiations regarding the attempted vacation of the lease relating to the dental practice in early 2013. He confirmed that on 10th April 2013 he received an offer from the landlord to settle the dispute for $50,000. Instead, Mr Do confirmed that his response to this (at the time) was to return the keys to the landlord and to reject the offer.[28] He said that rent was not stopped immediately at that time but that his “ex” (Ms Trinh) paid the rent, perhaps up until June 2013. His response as to whether these actions in 2013 led to his liability under the guarantee to crystallise was as follows:[29]
[28] T 70 – 71.
[29] T 71 – 73.
And you appreciated that when the payments of rent stopped you had a personal exposure to the land under your guarantee; right?‑‑‑At that point in time I – I did not in my mind ..... guarantee with the landlord.
Sorry. I didn’t quite catch that. Could you please repeat that?‑‑‑My ex paid the – the – the rent so in my mind at that time there I – the – the guarantor is not my memory – in my memory back – back then because there’s no one raising about guarantor, guarantee at that point in time.
MR DOOLEY: Is your evidence that no one was raising the guarantee in April 2013?‑‑‑To me?
Yes, to you. Is that your evidence?‑‑‑Yes.
Can you go to folder 1 of 2 of Ms Sijabat’s affidavit, LS1?‑‑‑Yes.
And turn to tab 10, please?‑‑‑Page 10?
Tab 10?‑‑‑10. Yes.
Page 257, please?‑‑‑Yes.
Can you see that that’s a letter from the landlord to the dental practice stating that:
I am instructed that on Friday, 12 April 2013 you delivered to the offices of the centre manager an envelope containing your keys to the premises. You are reminded that your lease does not expire until 31 July 2014. My client will not accept an early vacation of the premises.
Etcetera. See those words there?‑‑‑Yes.
Now, turn over, please, to page 258 and this is a letter to you dated 16 April 2013. Says:
Please find attached a copy of the letter sent to the tenant of the above premises pursuant to a lease dated 18 June 2004 under which you have guaranteed the performance of the lease by the tenant.
Do you see that?‑‑‑Yes.
You knew well on receiving that letter that the landlord was indeed raising the guarantee, didn’t you?‑‑‑Sorry, which letter you refer to?
258?‑‑‑258. This letter there on the letterhead is the ..... there. The – I don’t know whether they send to the PO Box which was not my PO Box so – now, my email there at this time I got – I could have log in issue there. I could not log in there. So I’m little aware ..... by box or by email.
There followed a series of exchanges with Mr Do, regrettably less than illuminating, as to whether or not he ever saw the correspondence referred to, how it may have been sent to his junk mail, or it was sent to the wrong GPO Box address, or simply that he never saw the correspondence. This was particularly curious given that he had recently sent his own correspondence via the same email address to which correspondence from the landlord has been sent.
For my part, it was regularly somewhat difficult to discern whether Mr Do was genuinely (a) misunderstanding relatively straight-forward questions that were put to him about his own financial affairs, (b) having difficulty recalling matters from some years ago, (c) feigning various, and to varying degrees of, lack of recollection of events and transactions involving significant amounts of money, or (d) otherwise undertaking some degree of obfuscation. Subject to what is said later in these reasons, noticeably when being questioned by Counsel for the Trustee, his evidence was faltering, imprecise, lacking in recollection and remarkable for both his lack of apparent interest in his financial affairs and remarkable apparent lack of comprehension about quite straight-forward matters. Yet when questioned by his own Counsel, and Counsel for the Second Respondent, his comprehension and apparent ease of recollection and response improved markedly. Again subject to what is said later, I found Mr Do’s evidence to be not only difficult and unreasonably imprecise, it was also regularly lacking in basic credibility, particularly regarding his lack of recollection about such significant amounts of money flowing through his various bank accounts.
Mr Do denied that (a) in 2012 and 2013, he had any concern about potential exposure regarding his personal liabilities, and (b) he thereupon engaged in a strategy to move substantial assets out of his personal name to avoid exposure to creditors.[30] What was curious, in my view, was that, on the one hand, Mr Do was moving significant sums of money in and out and between various bank accounts over a period of time (the sources of which were essentially unknown, as were other details), on the other hand, he maintained that he was always trying to resolve the issue of the dental practice lease with the landlord. However, compared to the sums of money referred to by the Trustee from his bank statements, the offer of settlement by the landlord was relatively modest. Why it was not resolved at that time (between 2012 and 2015) was never, from my perspective, satisfactorily explained. Mr Do said, in this regard, that he had some “low mental capacity” in 2015 and that he had “lots of distractions.” These were the reasons, he confirmed, why he did not challenge the judgment entered against him by the landlord in the Magistrates Court in 2015, which ultimately founded the bankruptcy notice, and ultimately his bankrupcty.
[30] T 75 – 77.
Mr Do said, as a reason why funds were being put into his self-managed superannuation fund, was to ensure that he had money available to pay for an operation he needed to deal with sleep apnoea. He denied that it would have been better to place any funds so required elsewhere.[31]
[31] T 77 – 78.
At the outset of the second day of Mr Do’s oral evidence, some questions arose in relation to the evidence (or lack of it) of the Third Respondent, Ms Trinh. This led to Counsel for the Trustee noting that not only was Ms Trinh not present and active at the hearing but also that there was no defence to the Trustee’s claim against her. In effect, this could also be taken inferentially to be a submission that orders against the Third Respondent would likely or ultimately be made on an undefended basis.
Turning then to the last few areas of Mr Do’s oral evidence, he was asked firstly about requests concerning documents produced (or usually not produced) in relation to the ASF. As with much of his earlier evidence, he could either not recall ever having produced the documents or having had them in the first place.[32]
[32] See T 87 – 89.
There was brief discussion with Mr Do regarding the proceedings in the Magistrate’s Court in 2014 taken by the landlord arising from the guarantee in relation to the lease of the dental practice premises. Mr Do said he had some health issues at this time, and ultimately, did not formally defend those proceedings. Although he seemed to imply that he had access to funds, his main response here was to say that he was not employed and therefore, he had no income. It followed that he was, he said, careful about the use of his funds. Notwithstanding his lack of recollection about defending the proceedings in the Magistrates’ Court, and his lack of recollection about having or producing certain documents referred to, he nonetheless confirmed that in the financial years 2013 – 2014, and again in 2014 – 2015, he continued to make financial transfers to the ASF. He said that these were “concessional contributions” and that his accountant had advised him that he could make them. It followed, and he confirmed, that he did not make these transfers to keep as much money as possible out of the hands of his creditors.[33]
[33] T 90 – 91.
Next Mr Do was again taken to pages 183-184 of Exhibit TD1, this being a Commonwealth Bank Statement. In it there is a reference to a deposit or credit of $200,000 on 18th December 2012. He was taken through a series of payments of amounts ranging from $4,255, to $75 (being for a payment for Andrew Do Brown Belt), next an entry for a payment to Optus for $115.19, another item of $200 for the transaction item of “shoes”, and similar figures that were laid out between December 2012 and January 2013.
It was put to Mr Do that none of these items to which he was taken related to anything to do with correction of building faults, which he had earlier said was what the $200,000, noted on 18 December 2012, was stated to refer to. In response, Mr Do simply said that these payments were taken from what he described as the Term Deposit and it was how he, and by inference his then wife, managed their daily life. He denied therefore that he had fabricated (see para. 71 of his Affidavit) the reason for the payment of $200,000. More specifically, the following was put to him:[34]
But you didn’t use it [the $200,000] to fix defaults or defects; did you, Mr Do? You paid it into the ASF?... And other things too, yes.
[34] T 93.
The next topic of discussion related to the Gozzard Street property purchased on 22nd January 2010 for $393,000. It was accepted by all, particularly after some discussion, that this property was not purchased by Mr Do in any personal capacity.
For better or for worse, the situation remained the same (and certainly did not improve) regarding various entries in January 2010 regarding the use of certain funds and in particular, $59,992.99 on 20th January 2010 and $107,500 on 29th January 2010. The latter entry took place one week after exchange in relation to the Gozzard Street property. Mr Do was asked questions about where the money came from for this purchase. His comments were as follows:[35]
Do you know where that money came from?‑‑‑It could – it could be from my – from my personal account or my – or – or the – or the – or the family trust distribution.
And do you have any documents now that might cast light on it?‑‑‑I don’t have now.
And you settled the purchase on around 3 to 5 February 2010; is that right?‑‑‑Yes, around there.
Do you recall why you settled the purchase around two weeks after the exchange into contracts?‑‑‑That’s – it’s not no connection at all. The – we have recommended the government provide self-manageable fund. The accountant encourage us to do set-up self-manageable fund, and we base on – rely on our accountant and their lawyers to set-up a self-super fund. So once we set-up self-manageable fund, then you need to commence – so you need to put contribution there. That’s – that’s – I think that not just for me, for anyone. I think a majority of people put their money into their super fund. So there is no connection at all between the two.
[35] T 96 – 97.
Next he was asked where or how he knew that Ms Trinh had relevant funds in relation to payments to ATB. Again, regrettably, information was scarce in relation to these matters:[36]
[36] T 97 – 98.
As at early February 2010 you were a director of ATB; right?‑‑‑Yes.
And that was a start-up building company; right?‑‑‑Yes.
And you only ever did one completed job for one client, being Ms Trinh, correct?‑‑‑Yes, I – no, the other one is my father-in-law.
And if there were any problems with Ms Trinh’s finances and her ability to pay ATB, that would put you in a position of conflict in enforcing the contract against Ms Trinh, do you agree?‑‑‑Disagree because ‑ ‑ ‑
So you’re saying – sorry, go on. I didn’t mean to cut you off. Keep going?‑‑‑Disagree because before commencing, my ex already have fund available. So anything we completed on, like, purchasing, signing the subcontracts, tradesmen, everything supplying, thing like that, already have fund available. So I – we know for sure that we have ability – the fund ability – have ability there to pay for the whole constructions except for those who make the mistakes didn’t come back to fix it – or the defects and did not come by. I think, like landscaping there, so overcharge. So thing like dispute in nature, that where the payments in dispute there, and the project has been settled with the advice from Vincents then.
HIS HONOUR: How did you know that Ms Trinh had the funds available for the property?‑‑‑Because before commencing that, I check to see – I make sure that there’s some fund available. So I got all the – I got all the budget. So I see how much the costs involved there, and from my recollection that my ex shall be the – I think the money, she had – she had – she can – she could pay for the whole construction there.
Do you know where she has got the money from?‑‑‑Her account – her own funds, her own savings.
So what was the – what was the complete total of the cost of construction?‑‑‑From my recollection it’s about around 750 to 800 or somewhere there.
Right, thank you.
MR DOOLEY: Just to clarify, I think you said you had funds available for the construction but not enough to cover defects or other issues with subcontractors, is that right?‑‑‑No, that’s not – that’s not what I mean. What I mean is, the – the defects and – is unfortunate things happen in construction and that’s normal. What I’m say is we got a budget but supposed to be that – those who got the costs – the defects should come back and fix it, they did not. So we – those defects have to be fixed down the track if it is possible. So the fund is there to fix it. That’s what I mean.
Next Mr Do was asked questions in cross-examination by Counsel for the Second Respondent, primarily in relation to Mr Do’s knowledge and recollection of entering into the lease relating to the dental property and the guarantee related to it.
Mr Do was reasonably certain that he received some legal advice prior to entering into the lease but had no recollection either of what that advice was or whether it dealt with the guarantee under it. Nor, as a practical matter, could he recall that in approximately 2010 Ms Trinh was only working part time in the dental practice. He said, however, that he had no concern about the viability of the dental practice in 2010. Equally, he was not concerned about whether the rent would continue to be paid to the landlord at that time.
Finally, Mr Do confirmed that the decision to purchase the Gozzard Street property was made by himself and Ms Trinh “to invest a property for the superfund.”[37]
[37] T 105.
In response to questions from Counsel for the Second Respondent, Mr Do said that to the best of his recollection, the first time that any issue relating to or arising from the guarantee arose around September 2014 or September 2015.[38] He also confirmed his recollection was that in approximately October 2014, he settled a claim that was brought against him by the Liquidator of ATB; the settlement sum was $20,000. He said that these funds came from “resources that were available to [him]”.[39] Then followed a series of questions about his contributions regarding superannuation and how he relied always upon advice from his accountant. This was advice that was given in 2009 and seemingly in following years. The advice included the virtue of putting money into his superannuation for his future retirement. He confirmed that he kept making these contributions to superannuation before and after the debt to ATB was paid. In a similar vein, the purchase of the Gozzard Street property was based, Mr Do agreed, on the advice of his accountant. Again it was confirmed that the Gozzard Street property was purchased in 2010 and that he did not “come before the Territory Court until July 2015”.[40]
[38] T 107.
[39] T 108.
[40] T 110 – 112.
The last question put to Mr Do confirmed that as at April 2017 the amount outstanding to creditors was $67,405.25. He was then asked,[41]
Do you understand why it is that the Trustees in this case have a claim against you for a million dollars or more than a million dollars?… I have no idea.
[41] T 113.
For my part, as stated earlier, it was regularly quite difficult to discern whether Mr Do was genuinely (a) misunderstanding relatively straight-forward questions that were put to him about his own financial affairs, (b) having difficulty recalling matters from some years ago, (c) feigning various, and to varying degrees of, lack of recollection of events and transactions involving significant amounts of money, or (d) otherwise undertaking some degree of obfuscation. It was very noticeable when being questioned by Counsel for the Trustee that his evidence was faltering, imprecise, lacking in recollection and remarkable for both his lack of apparent interest in his financial affairs and remarkable [apparent] lack of comprehension about quite straight-forward matters. Yet when questioned by his own Counsel and Counsel for the Second Respondent, his comprehension and apparent ease of recollection and response improved markedly. In short, I found Mr Do’s evidence to be not only difficult and unreasonably imprecise, it was also regularly lacking in basic credibility, particularly regarding his lack of recollection about significant amounts of money flowing through his various bank accounts.
Applicant’s Case Outline
The Applicant’s detailed written submissions, filed in Court on 2nd June 2021, were as follows: (emphasis in original)
1.The Applicants are the trustees in bankruptcy of Mr Do. They were appointed on 30 September 2016.
2.Mr Do, the bankrupt, is the first respondent. At least until around August 2012, he was the trustee of the Andrew Superannuation Fund (ASF).
3.Do Construction Pty Ltd is the second respondent. It has been the trustee of the ASF since around August 2012.
4.Ms Trinh is the third respondent. She was married to Mr Do (and might still be married to him, although there is also a suggestion they have separated).
5.There are three categories of claims the subject of the Applicants’ case:
(a) Payments made by Mr Do to ASF in the financial years ending 30 June 2013, 30 June 2014, and 30 June 2015.
(b) Payments made to Ms Trinh of $30,000 on around 28 July 2015.
(c) The ownership of property at 4/38 Gozzard Street, Gungahlin, ACT (Gozzard Street Property).
Category 1
6.The payments made to the ASF total $469,926, and are comprised of:
(a) $437,767 in the 2012/2013 financial year;
(b) $7,159 in the 2013/2014 financial year; and
(c) $25,000 in the 2014/2015 financial year.
7.The Applicants contend that these payments would have become part of the bankrupt estate, or been available to Mr Do’s creditors, had they not been paid into the ASF. The Applicants seek that sum plus pre-judgment interest, under s 128B of the Bankruptcy Act 1966.
8.The Applicants anticipate debate will be centred on s 128B(1)(c), the “main purpose” of the bankrupt in making the transfers. The Applicants case is that the “main purpose” is satisfied for two distinct reasons.
9.The first is that the evidence and (it is anticipated) the cross-examination will reveal that from around mid-2012 to mid-2013, the bankrupt took steps to move assets out of his personal name, including by entering into an arrangement with his wife pursuant to which (i) the family home was transferred from him (as the sole owner) to the 3rd Respondent as the sole owner, (ii) she made payments to him (which he then promptly transferred into his superannuation account), and (iii) she transferred her superannuation entitlements to him.
10.The second is that the presumptions in s128B(5) and the deeming provision in s 128B(2) are triggered
Category 2
11.In respect of the payments made to the Third Respondent, the Applicants contend that there was no consideration given for these, and they are undervalued transactions under s 120, or were transfers made to defeat creditors under s 121.
12.The Third Respondent has filed no evidence and put on no Defence.
Category 3
13.In respect of the Gozzard Street Property, the Applicants’ principal case is that, under s 239 of the Civil Law (Property) Act, this was a disposition of property with an intent to defraud creditors.
14.The authorities show that the necessary intent can exist even where there are no current creditors, but only future creditors (Barton v Deputy Federal Commission of Taxation (1974) 131 CLR 370 at 374).
15.The Applicants contend that the current and future creditors at the time likely included (at least) the ATO and a landlord of premises in respect of which the bankrupt had given a personal guarantee.
16.The pool of resources is less than what would otherwise be available if the disposition were set aside, and an order lies against the bankrupt to make the Gozzard Street Property available to satisfy his obligations (see the form of order in Nguyen v Corbett (No 2) [2018] NSWSC 441, on page 1, and the reasoning at [26]-[28]).
The Applicant’s Closing Submissions
The Applicant’s closing submissions were filed in Court on 4th June 2021. They were as follows (emphasis in original; schedule omitted):[42]
[42] Prior to delivery of judgment, the Court raised with the parties a series of questions regarding certain aspects of Mr Do’s evidence. Each party, except the Third Respondent, provide further submissions. Curiously, the Applicant seemed to consider, to a limited degree, that the Court was seeking further evidence, as opposed to further submissions. In the result, nothing turned on these further submissions, which are annexed to these reasons (Annexure A), simply to ensure their disclosure. They include the questions asked by the Court. The Court only had regard to the submissions provided during the hearing.
Introduction
1.The Applicants are the trustees in bankruptcy of Mr Do. They were appointed on 30 September 2016.
2.Mr Do, the bankrupt, is the first respondent. At least until around August 2012, he was the trustee of the Andrew Superannuation Fund (ASF).
3.Do Construction Pty Ltd is the second respondent. It has been the trustee of the ASF since around August 2012.
4.Ms Trinh is the third respondent. She was married to Mr Do, and in 2019 (as per a Court file produced during the hearing) they were divorced.
5.There are three categories of claims the subject of the Applicants' case:
(a)Payments made by Mr Do to ASF in the financial years ending 30 June 2013, 30 June 2014, and 30 June 2015.
(b)Payments made to Ms Trinh of $30,000 on around 28 July 2015.
(c)The ownership of property at 4/38 Gozzard Street, Gungahlin, ACT (Gozzard Street Property).
6.In respect of Category 1, the payments made to the ASF:
(a) Some were concessional contributions, which are tax deductible (but capped at $25,000 a year).
(b) Others were non-concessional contributions. These are not tax deductible, but at the relevant time could be made up to $150,000 per year. It was also possible to make 3 years' worth of non-concessional contributions in one year. Here, for example, in the 2012/2013 financial year, Mr Do made non-concessional contributions of $412,767, being $150,000 for the 2012/2013, and 2013/2014 financial years, and $112,767 for the 2014/2015 financial year.
7.The Applicants seek recovery of $437,767 that was paid by Mr Do into the ASF in the 2012/2013 financial year, comprised as follows:
(a) 19 July 2012 - $5,000 (a non-concessional contribution).
(b) 31 October 2012 - $50,000 (a non-concessional contribution).
(c) 31 January 2013 - $382,767 (a non-concessional contribution as to $357,767, and a concessional contribution as to $25,000).
8.As for the 2013/2014 financial year, the Applicants seek recovery of $7,159, which was paid by Mr Do into the ASF as follows (all concessional contributions):
(i)12 December 2012 - $13.92.
(ii) 18 December 2012 - $5,100.
(iii) 26 Jun 2014 - $2,045.
9.For the 2014/2015 financial year, the Applicants seek recovery of a single concessional contribution of $25,000 paid by Mr Do into the ASF on 29 June 2015.
10.The Applicants contend that the payments referred to in [7] to [9] (totalling $469,926) would have become part of the bankrupt estate, or been available to Mr Do's creditors, had they not been paid into the ASF. The Applicants seek that sum plus pre-judgment interest.
11.In particular:
(a) The Applicants contend that Mr Do was engaged in a strategy intended to divest himself of assets in his own name, with the main purpose was to prevent those amounts becoming available to creditors.
(b) Further, Mr Do was insolvent or about to become insolvent (including because of assumptions arising due to an absence of books and records).
(c) The Applicants contend that, in those circumstances s 128B of the Bankruptcy Act 1966 is engaged so as to make the transfers void against the Applicants.
12.In respect of Category 2, the payments made to the Third Respondent, the Applicants contend that there was no consideration given for these, and they are undervalued transactions under s 120, or were transfers made to defeat creditors under s 121.
13.In this respect, the Third Respondent has filed no evidence and put on no Defence.
14.In respect of Category 3, the Gozzard Street Property, the Applicants' principal case is that, under s 239 of the Civil Law (Property) Act, this was a disposition of property by Mr Do with an intent to defraud his creditors. The pool of resources is less than what would otherwise be available if the disposition were set aside, and an order lies against him to make the Gozzard Street Property available to satisfy his obligations.
15.These submissions refer mainly to the affidavit of Mr Do affirmed on 27 May 2021 and its accompanying Exhibit TD-1, and the affidavit of Ms Sijabat affirmed on 14 October 2019 and its accompanying Exhibit LS1. They also refer to the Applicants' Exhibit A (Bundle).
Facts
2000 to 2009, including Dental Centre’s lease
16.From 2000 to 2007 Mr Do worked for the Department of Defence (Do [37]). He made contributions to his superannuation. These were in the region of 2% to 5% of his salary (on the Applicants' calculations, ranging from $719.72 to $3,305.70) (TD-1 p 124).
17.On 22 March 2004, Gungahlin Market Place Dental Centre Pty Ltd (Dental Centre) was incorporated (Do [6]). Mr Do was the sole director (LS1, Tab 1, p 4).
18.On 18 June 2004, Dental Centre signed a lease of premises out of which the 3rd respondent practised as a dentist (Dental Premises). The lease was for a 10 year term. Mr Do was the guarantor (Do [7]-[8]).
19.The lease was initially with Tower 720 Pty Ltd, but it appears that the Dental Premises were later assigned to Goongarline Properties Pty Ltd, although nothing turns on this (see a Statement of Claim [8]-[9] served by the landlord on Mr Do, TD-1 p 80).
20.(As is developed below, the Dental Centre broke the lease, and the landlord sued Mr Do on the guarantee. It was this sequence of events that led to his bankruptcy.)
21.Mr Do also ran a restaurant known as "Red Chillies". By 2008 it had closed, having a depreciation of $93,430 and a loss of $19,709 (see Vincents' report dated 1 October 2010, p 5).
2009: A Trustful Builder Pty Ltd is incorporated; downturn in Dental Practice
22.In 22 April 2009, A Trustful Builder Pty Ltd (ATB) was incorporated (Do [11]). Mr Do was the sole director (Do [11]).
23.It only ever had one completed building project, the family home, where the third respondent was the client, and at which Mr Do still lives (LS1, Tab 8, p 192).
24.(The ATB entity is relevant because it later went into liquidation, and Mr Do was examined and sued by the Liquidator, although that sequence of events did not directly lead to him being made bankrupt.)
25.On 26 May 2009, Mr Do emailed the landlord, proposing to change the tenant of the Dental Premises to Tienvan Investments Pty Ltd (Bundle, Tab 1, p 8).
26.On 14 August 2009, Mr Do emailed the landlord, indicating his concern about an economic downturn, and referring to 5 other dentists in the area (Bundle, Tab 1, p 7-8).
27.On 29 September 2009, Mr Do emailed the landlord, indicating that the "dental market at Gungahlin town centre is more competitive now" (Bundle, Tab 1, p 6).
28.Mr Do also instructed Vincents that, in the 30 June 2010 financial year, the 3rd Respondent only worked part time following the birth of their child, and "the revenue of the Business has dropped significantly during Ms Trinh's absence" (Vincents' Report, p 22).
29.On 1 October 2009, Mr Do and the 3rd Respondent set up the ASF (Do [12]).
30.Mr Do started making significant transfers into it in January 2010 (of $59,992.99 and $107,500), with further significant contributions in March 2010 ($211,130 and $66,982.25).
2010: Purchase of Gozzard Street; closure of Dental Centre
31.On 22 January 2010, Mr Do (in his capacity as trustee of the ASF), as purchaser, entered into a contract for the sale of land of the Gozzard Street Property (Do [63]). The purchase price was $393,000 (LS1, Tab 16, p 531).
32.On around 5 February 2010, the purchase of the Gozzard Street Property settled (LS1, Tab 16, p 532).
33.On 12 August 2010, the landlord of the Dental Premises wrote to the Dental Centre, indicating that it had come to the landlord's attention that the Dental Centre was not trading, contrary to an essential condition of the lease (Bundle, Tab 1, p 2).
34.On 4 October 2010, Mr Do sent an email acknowledging that the premises had been temporarily closed (LS1, Tab 6, p 169).
35.(The Applicants contend that, from this time, Mr Do must have appreciated he had an exposure under his personal guarantee of the lease.)
2011: ATB is in a dispute and placed into liquidation
36.In May 2011, a dispute emerged as between ATB and Mate Landscaping in respect of a claim by Mate Landscaping for $12,241.80 (Do [14]). Mate Landscaping issued a Statutory Demand on 23 June 2011 (TD-1, p 1-3).
37.On 14 August 2011, Dental Centre was deregistered (LS1, Tab 1, p 3; Do [26]). This must have reinforced to Mr Do the fact that he had an exposure under the guarantee: the tenant no longer existed.
38.On 24 October 2011, ATB was placed into liquidation (Do [20], Sijabat [11]).
39.On 27 October 2011 (3 days after the appointment of a Liquidator to ATB), the 2nd Respondent (Do Construction Pty Ltd) was incorporated.
40.On 3 November 2011, the Liquidator sent a letter to Mr Do about alleged breaches of his directors' duties (Do [21]).
41.(The Applicants contend that, from this time, Mr Do must have appreciated he had an exposure in respect of his role of director of a company in liquidation, where the Liquidator had notified him of allegations of breaches of duty.)
2012: Examinations by Liquidator of ATB, and property settlement
42.On 19 July 2012 and 24 August 2012 (LS1, Tab 8, p 183 and 207), Mr Do was examined by the Liquidator of ATB, which indicated on 24 August 2012 that there were various claims the Liquidator may press (LS1, p 243).
43.Importantly, on 19 July 2012 Mr Do indicated that the family home (the sole completed project of ATB) was in name (perhaps together with Ms Trinh: this does not matter) (LS1, Tab 8, p 195 L32-36); and on 24 August 2012, the Liquidator indicated he was considering claims (LS1, Tab 8, p 243-244), after referring to (amongst other things) irregularity in the lodgement of taxation documents and the ATO raising a debt of $18,926, with it potentially being larger (p 229-230).
44.On 28 August 2012, the ASF was purportedly varied, so as to appoint Do Construction as the trustee (affidavit of Thi Do, Mr Do's sister, of 24 May 2021, Ex TT-3 p 3). (Thi Do was appointed a director of Do Construction in May 2020.)
45.On 29 August 2012, Mr Do entered into a property settlement with the 3rd respondent (LS1, Tab 9, p 248). The effect of this broadly was:
(a) Mr Do’s interest in the family home would be transferred from him to the 3rd respondent, so that she would become the sole owner (order 1)
(b) Her superannuation entitlements in the ASF would be transferred to Mr Do (order 12).
(c) She would pay to him $230,000 (order 6, for $150,000; and order 20, for $80,000 in respect of spousal maintenance).
(d) The trustee of the Do Family Trust (being a different trust from the ASF) would transfer to Mr Do 9/4 Riley Place, Ngunnawal, including discharge the mortgage (order 5 and 7).
46.Thus, after the Liquidator raised his interest in the family home (on 19 July 2012), and the potential claims against him (on 24 August 2012), almost immediately a sequence of events was put in place where the family home was transferred out of his name, and very large amounts of money were moved from the 3rd Respondent into the superannuation fund (but out of the immediate reach of Mr Do's creditors).
47.In November 2012, Mr Do sought to negotiate with the landlord of the Dental Premises various commercial arrangements that would permit an early exit of the lease. These attempts were rebuffed by the landlord (Bundle, Tab 1, p 10).
48.Mr Do later suggested even more creative arrangements to try to get out of the lease, including that the Dental Surgery be converted to a tattoo parlour in February 2013 (Bundle, Tab 2, p 25).
2012-2013: Superannuation contributions and CBA payments
49.The first set of impugned superannuation payments were made in this period, as referred to in [7] above.
50.Those payments were made as part of an extraordinary sequence of movement of very large sums of money through 2 different CBA accounts - totalling over $2 million in around 18 months, just looking at transfers over $20,000 (as per a separate chronology handed up shortly prior to the luncheon adjournment on day 1).
51.How Mr Do obtained sufficient funds to make those payments cannot be reconciled with his tax returns, which show no income other than a comparatively modest amount from a trust.
52.On 29 March 2018, the Official Receiver sent a letter to Mr Do, requesting books and an explanation of the same transactions, including (Bundle, Tab 7, p 49):
(a) the nature of the payment;
(b) settlement statements;
(c) withdrawal authorities; and
(d) debt claims and/or statements from each recipient.
53.Nothing was provided by him in response. In cross-examination, he gave evidence that his answers in the exam on 9 May 2018 cast light on the matters, but there is nothing in the transcript which does so (LSA, Tab 12, p 383 onwards), and he was specifically asked about the request for information about CBA accounts at p 390-391, with his responses indicating he had provided no information whatsoever.
54.The total of the transactions the subject of the 29 March 2018 notice for Items 2.i to 2.iv, for the period March 2011 to April 2013, was:
(i)debits of $3,687,564.79;
(ii)credits of $3,731,300.30
55.Including the October transactions at 2013 at item 2.v, the total is $4,028,209.17 for debits and $4,071,944.68 for credits.
56.These transactions were, and continue to be, entirely unexplained.
57.On 8 August 2018, the Applicants (in a letter of demand, LS1, Tab 26, p 696) also specifically referred to him not having produced any evidence of having kept such books, accounts and records as are usual and proper in relation to his business, and sufficiently disclose the business transactions and financial position.
2013-2014: Events following the CBA Transfers
58.To return to the chronological narrative, shortly before the CBA account was closed in late April 2013, on 10 April 2013 the landlord offered to Mr Do to settle the entirety of the claim for rent and make-good for $50,000 (Bundle, Tab 1, p 20). However, the next day Mr Do returned the keys (LS1, Tab 6, p 169).
59.Mr Do, again, must have appreciated his exposure as guarantor following the return of the keys. In cross-examination, he said that his guarantee had not been raised by the landlord in April 2013. He was then shown a letter from the landlord, dated 16 April 2013 (LS1, Tab 10, p 258), which raised the guarantee. He then said he never received that document, and that he had email accessibility issues at the time. However, he was unable to proffer any explanation for how that explanation could be reconciled with him having sent an email from that very email address on 15 April 2013 (Bundle, Tab 1, p 19).
60.This evidence had all the hallmarks of a desperate attempt by a witness, when confronted with a problematic document, of seeking to invent evidence to seek to exculpate him from the issue - here, ultimately relying on the hitherto unraised proposition, entirely untestable, of the email going to his junk mail folder.
61.The evidence in cross-examination is even more problematic for Mr Do given that he referred to the 16 April 2013 letter regarding the guarantee in his affidavit at [28], without any mention of an email accessibility issue or junk mail, or suggestion that he had not received the letter.
62.Mr Do gives evidence that by June 2013, the Dental Premises were vacated and Mr Do stopped paying rent (Do [26]-[27]).
63.On 23 December 2013, the Liquidator of ATB commenced proceedings against Mr Do (Do [42]).
64.On 7 August 2014, the landlord of the Dental Premises commenced proceedings against Mr Do in the Magistrates Court (TD-1, p 75).
65.On 18 August 2014, he sent an email to the landlord's solicitors saying "Firstly, I don't have any incomes now and currently living on debs and I need to seek Legal Help from Government to see if they could assist in defending this case" (Bundle, Tab 3, p 29).
66.On 2 October 2014, Mr Do entered into a Deed to settle the claim of the Liquidator of ATB (Do [25]).
67.On 7 July 2015, the Magistrates Court made an order against Mr Do for $50,000 in favour of the landlord (LS1, Tab 13, p 52).
68.On 8 August 2015, ATB was deregistered (LS1, Tab 7, p 171).
69.On 13 May 2016, the landlord served a bankruptcy notice (LS1, Tab 13, p 52).
70.On 27 July 2016, the landlord filed a Creditor's Petition (LSA, Tab 13, p 518).
71.On 30 September 2016, Mr Do was declared bankrupt (Do [32], LS1, Tab 14, p 523).
Payments made to ASF
Introduction
72.The relevant transfers are referred to at [31], [38] and [45] of the Statement of Claim.
73.In their Defences, Do Construction admits all 3 paragraphs, and Mr Do admits them (with some seemingly inconsequential additional wording). In any event, the transfers are accepted by him as having been made, at [41] of his affidavit.
74.The Applicants rely on s 128B, which is set out in the Schedule to these submissions.
75.Section 128B(1) has four elements that must be satisfied:
(a)First, the transfer is made by way of contribution to an eligible superannuation plan (s 128B(1)(a)).
(b)Second, the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred (s 128B(1)(b)).
(c)Third, the transferor's main purpose in making the transfer was (s 128B(1)(c)):
(i)to prevent the transferred property from becoming divisible among the transferor's creditors; or
(ii)to hinder or delay the process of making property available for division among the transferor's creditors.
(d)Fourth, the transfer occurs after 28 July 2006 (s 128B(1)(d)).
76.There is no issue as to the first or fourth elements.
77.As for the second element:
(a)One must consider what would have happened if the property had not been transferred (see eg Peldan v Anderson (2006) 227 CLR 471, [2006] HCA 48 at [33]-[35], in respect of s 121(1)(a), which is identical to s 128C(1)(b)).
(b)In this case, there is no reason to think that the money would have been otherwise than an asset of Mr Do and available to creditors.
(c)It follows that the second element is satisfied.
78.The real debate in this case is as to the third element.
Third element - s 128B(1)(c): The transferor's main purpose in making the transfer
79.The Applicants submit that there are two distinct means by which the Court would conclude that s 128B(1)(c) is satisfied (see Warner (Trustee), in the matter of McMillan (Bankrupt) v McMillan [2020] FCA 1759 at [15]).
80.The first is a direct finding of fact as to Mr Do's actual intent - here, likely by inference from other facts (as opposed to any admission made by Mr Do as to his subjective intent at the time).
81.The second is by use of the presumption in s 128B(5), and deeming provision in s 128B(2).
Actual intent was the "main purpose"
82.The proper inference on the evidence is that Mr Do's "main purpose" in making the impugned transfers was to prevent the money being divisible amongst his creditors for these reasons:
(a)He was personally liable under the guarantee of the lease of the Dental Centre ([18] above).
(b)In April 2009, Mr Do had started ATB. But it only had one client - his wife. And the only house it completed was the family home ([23] above). This was obviously a precarious commercial position for ATB: if the client (his wife) had a downturn in income - which happened, see immediately below - ATB would not be able to obtain judgment and enforce against the house (or other of Ms Trinh's assets, such as garnishee order), given that they were (definitely at that time) married and it was the family home, and the obvious commercial pressures in suing one's spouse. The incorporation of ATB was also hot on the heels of his failed restaurant venture ([21] above). It is obvious that there was significant risk of failure attended to this project, which it is to be inferred he was well aware of.
(c)Following a downturn in the 2009/2010 financial year, including because the 3rd respondent was working part time ([26]-[28] above), Dental Centre ceased trading in in August 2010 ([33] above), which he acknowledged on 4 October 2010 ([34] above). Dental Centre was deregistered on 14 August 2011 ([37] above). There was an exposure that he inevitably had under his guarantee in those circumstances.
(d)In May 2011, the dispute with Mate Landscaping which led to the downfall of ATB emerged (on 24 October 2011) (see [36] and [38] above). The Liquidator promptly notified him of a claim for breach of directors' duties ([39] above). Also around that time, Dental Centre was deregistered ([37] above).
(e)Thus, the risks that Mr Do was exposed to - of Dental Centre's failure and his guarantee; and of ATB encountering difficulties - were beginning to manifest.
(f)The Liquidator of ATB then examined Mr Do on 19 July 2012 and 24 August 2012, including referring to claims that might be pressed, and asking questions about the family home - clarifying that his name was on title ([42]-[43] above).
(g)There was a swift response to this by Mr Do. Five days after the 2nd examination, he entered into the property settlement with the 3rd respondent, the effect of which was to get the family home out of his name, in exchange for his wife's super entitlements (which were held in the ASF) ([45] above).
(h)Not long after, in November 2012, Mr Do attempted to negotiate an arrangement for a new tenant, so as to remove his exposure under the guarantee. But these attempts were rebuffed ([47]-[48] above).
(i)In April 2013, Mr Do effectively accepted his exposure under the guarantee, handing back the keys, and not accepting an offer made by the landlord to resolve the entirety of the dispute for $50,000 ([58] above). This sequence, again, reinforced his exposure.
(j)Mr Do closed his CBA bank accounts also in late April 2013, after withdrawals and deposits of around $3.7 million dollars from March 2011 to April 2013 ([54] above).
(k)Mr Do's purported reason (at [35] of his affidavit) for not paying the specific debts, because presumably he challenged their validity, should be rejected. In particular, the liability on which he was made bankrupt was a guarantee under a lease - there is no suggestion of anything controversial about it. Even less controversial was the subsequent court order, which founded the Bankruptcy Notice ([67] above).
(l)Mr Do's purported reason (at [36] of his affidavit) for putting money in his SMSF, because of him having chronic sleep apnoea, "fear about my future", and maybe needing to pay large medical expenses for potential operations should be rejected. If he has large medical expenses or bills it makes no sense to lock money into a SMSF where it cannot be accessed in the ordinary course: the sensible way would be to have the money accessible so it can be paid (assuming that the operations are not covered by the public health system). So far as he asserts "I may not be able to work", there is no evidence of that whatsoever, and given his career at the Department of Defence for 8 years, and subsequent attempts at entrepreneurialism, this should be rejected.
(m)The subsequent transfers made to the ASF (in the 2014 and 2015 financial years) were during a time where Mr Do was being sued by the landlord, and he had asserted (on 18 August 2014) that he had no income and was living on debts, and would seek government assistance for the defence of the debt claim (see [65] above).
83.Ultimately what one has in this case is a slow but steady sequence of events where Mr Do had exposures, had assets, received indications that those assets were under threat from third parties, and subsequently took steps to remove his assets from their reach.
84.The Applicants accept that, in this aspect of the case, "Proof of the "main purpose" required the Trustee to prove that the "purpose" was the "principal" or "leading" purpose or the "prevailing or most influential" purpose" (Warner (Trustee), in the matter of McMillan (Bankrupt) v McMillan [2020] FCA 1759 at [54]).
85.However, the Applicants submit that these facts comfortably permit the Court to draw the inference that Mr Do had the "main purpose" referred to in s 128B(1)(c).
86.Before departing this topic, something needs to be said about Mr Do's evidence given in cross-examination:
(a)He showed a consistent approach of giving evasive answers to even simple questions.
(b)He had very long pauses even before answering uncontroversial questions.
(c)Many of his answers, such as not having any understanding of whether Ms Trinh's dental practice was open or closed, despite them living together, and him being a personal guarantor, and his communications with the landlord, is not believable.
(d)It is submitted he gave false evidence in respect of receipt of the 16 April 2013 email, and he then made up further evidence about that (as already outlined).
(e)When questioned by the Court about a "Phi Long" transaction as appearing in the CBA bank statements, he was unable to give a straight answer.
87.The answers given in cross-examination in respect of the CBA bank statements are also significant:
(a)These statements were exhibited by Mr Do to his own affidavit.
(b)He referred to them in detail at [46]-[55] of his affidavit, when indicating what amounts were in his bank account as at the time of the impugned statements.
(c)However, those very statements, he was not able to explain a single transaction, or provide any supporting documents.
88.It may be accepted that these transactions were a number of years ago. But the utter inability to recall any detail about, perhaps being generous, a handful of transactions (with those details being very high level, and scant) indicates that he is not being frank with the Court. Why that might be is unknown. But the fact that Mr Do has not put the full picture of his dealings before the Court is a matter of fact that more readily would permit the Court to infer that his purpose in structuring his affairs was one not consistent with honest and prudent business practice.
89.The nature of the evidence given in cross-examination also means that the Court should reject Mr Do's evidence, including his motivations at [36], absent where it is corroborated by a contemporaneous business record or an admission against interest.
Presumptions and deeming
90.The second is reliance on the rebuttable presumption in s 128B(5), and the deeming provision in s 128B(2).
91.Section 128B(2) provides that Mr Do's purpose is taken to be that of s 128B(1)(c) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, he was, or was about to become insolvent (for shorthand, the balance of these submissions refer to being insolvent, but that should be taken to include "about to become" insolvent).
92.If s 128B(2) is satisfied (that is, that Mr Do was insolvent), there is no further inquiry as to the "main purpose" - it is an irrebuttable or conclusive presumption (see Lo Pilato (Trustee) v Kamy Saeedi Lawyers Pty Ltd, in the matter of Adzic (Bankrupt) [2017] FCA 34 at [158]-[160] in respect of the analogue provision in s 121).
93.Thus, if the Applicants establish that Mr Do was insolvent, that is the end of the point as to whether the "main purpose" in s 128B(1)(c) is satisfied: it will have been.
94.In contrast, s 128B(5) creates a rebuttable presumption. It provides:
(5) For the purposes of this section, a rebuttable presumption arises that the transferor was, or was about to become, insolvent at the time of the transfer if it is established that the transferor:
(a) had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor's business transactions and financial position; or
(b) having kept such books, accounts and records, has not preserved them.
95.The Applicants have not located any authority dealing with this (or the analogue provision, s 121(4A)). The wording is somewhat different from the Corporations Act equivalents (eg s 286 and s 588E(4)).
96.The first step is to consider s 128B(5)(a) and (b) - namely whether Mr Do:
(a)kept such books, accounts and records as are usual and proper in relation to the business carried on by him; and
(b)sufficiently disclose his business transactions and financial position.
97.The Applicants submit that the evidence before the Court cannot be said to constitute proper books, accounts, and records as are usual and proper, and that what has been produced to not sufficiently disclose his business transactions and financial position.
98.Mr Do was taken to each line item of bank statements that he exhibited with amounts of over $20,000. He indicated that he had no documents for almost all of the transactions (save as to one transaction of $590,000 on 12 April 2012, TD-1 p 178), and produced nothing for that transaction. He also could not, as stated above, provide any details as to what any of them were.
99.Importantly so far as s 128B(5) is concerned, he said he did not keep records of these transactions as they were personal. Thus, to the extent books ever existed, they have not been kept, so that s 128B(5)(b) is engaged.
100.He also did not provide any books or records in response to the noticed dated 29 March 2018 (Bundle, Tab 7, p 49), which covered the period and sought documents in respect of bank transactions from 24 March 2011 (item 2.iv) to 28 July 2015 (Item 1); and the subsequent items sought documents in respect of his other interests up to (and in some cases after) the date of bankruptcy.
101.Thus, the Applicants contend that the rebuttable presumption as to insolvency as engaged for the entirety of the period the subject of this case.
102.The nature of s 128B(5) is that the onus must inevitably shift to Mr Do to rebut the presumption: that is, without anything more, the Court must conclude (on the basis of the presumption) insolvency.
103.Here, there is no solvency report (and Mr Do obviously is aware of what they are, having prepared one in support of ATB's solvency, exhibited by him in this case, TD-1 p 5).
104.Moreover, not only is there is no evidence by Mr Do as to the large quantities of money coming in and going out of his bank account, he has given positive evidence that he does not know what the sums were, who paid them in, and (perhaps even more peculiarly) the destination to which they were paid by him.
105.This is particularly the case because Mr Do has made no attempt at all in his evidence to explain what he did, by way of occupation, save as to (as a director of ATB) building the family home. But a Liquidator was appointed to ATB on 24 October 2011 (Do [20]). From then, the evidence is silent. His tax returns record no wages being paid, only trust distributions, interest, and occasionally capital gains.
106.In these circumstances, on the whole of the evidence the Court cannot be satisfied that the presumption has been rebutted.
107.Rather, on the whole of the evidence one is simply left speculating; wondering about how Mr Do came into very significant sums of money, almost all of which were paid out, where he has almost no recall at all of anything and has no documents.
108.Merely because he seemingly had access to large sums of money is not sufficient to rebut the presumption in this case, because:
(a)Again, there is no explanation as to those transfers.
(b)There is no evidence that the money he received was not earmarked for some other use, or obliged to be paid by Mr Do to a third party.
(c)There is no evidence that he had an unfettered right (or any right) to use the money.
(d)In particular, if he had an unfettered right to use the money, there is no evidence as to why he simply did not make the payment to the landlord (either following the offer on 10 April 2013, see [58] above; after proceedings were commenced; after the judgment; or after the bankruptcy notice).
109.Thus, the Applicants submit that s 128B(5) has the result that:
(a)The books and records are such that the rebuttable presumption, that Mr Do was insolvent, arises.
(b)Without Mr Do persuading the Court that the presumption as to insolvency should be rebutted, he is taken to be insolvent.
(c)On the material before the Court, Mr Do would not succeed in rebutting the presumption.
110.As already outlined, if this is correct then the effect of this is to engage the deeming provision in s 128B(2), which means that the Applicants succeed in establishing the "main purpose" in s 128B(1)(c).
111.For the reasons above, the orders sought in [60](a)-(d) of the Amended Statement of Claim should be made.
Payments to the Third Respondent
Section 120
112.This claim is concerned with payments of $30,000 made by Mr Do to the 3rd Respondent on 28 July 2015.
113.The making of the payments are admitted in Mr Do's Defence.
114.As mentioned above, the 3rd Respondent has not filed a Defence or put on evidence.
115.Mr Do seeks to make submissions on this point. He has no standing to do so.
116.Assuming that Mr Do's submissions are able to be put, s 120(1) is engaged where two circumstances are satisfied:
(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;
(b)the transferee gave no consideration for the transfer, or gave consideration or less than the market value of the property.
117.To turn to the first of the two matters in s 120(1), the date of bankruptcy was 30 September 2016. The impugned transfers are within 5 years of that date.
118.To turn to the second of the two matters, there is no evidence indicating that the 3rd Respondent gave consideration for the transfers.
119.At its highest, the evidence of Mr Do suggests these were some sort of repayment he made due to an excess of funds he had received - but there is no suggestion of any binding contract, or consideration.
120.As was said in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, [2002] HCA 8 at [24], "It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty", also requiring the movement of consideration.
121.Here, the evidence fails to disclose the voluntary assumption of a legally enforceable duty, or the movement of consideration.
122.The highest the evidence goes is the conversation at [73] of Mr Do's affidavit. That evidence should be rejected as it is uncorroborated (see [89] above). Putting that to one side, the conversation is not in the nature of legally binding promises, or any consideration moving - and is insufficient to establish a contract.
123.Further to that fundamental difficulty to one side, the evidence as to the actual transfers is insufficient to show that the payments of 28 July 2015 were made pursuant to any contract.
124.First, Mr Do refers to a payment of $200,000 made on 18 December 2012, purportedly for works to be done on the family home. However, that payment was promptly vacuumed up by him into the ASF, by the impugned payment of $382,767 on 31 January 2013.
125.After that there were 7 cents left.
126.There is no evidence that the payment by Ms Trinh was for the purpose referred to by Mr Do.
127.Similarly, so far as there were payments by Ms Trinh to Mr Do of $25,600, there is no evidence as to what happened to them being made, with [73] of Mr Do's affidavit being a conversation that took place some time before 18 December 2012; and no evidence sufficient to indicate that there was a contract in which consideration moved. The payments of $25,600 obviously do not match the impugned sum of $30,000 - an anomaly entirely unaddressed.
128.Thus, even if Mr Do has standing to argue this point, the matters raised by him should be rejected.
Section 121
129.Section 121 is set out in the Schedule.
130.Section 121(1) is satisfied where:
(a)the property transferred (here, the $30,000) would probably have become part of Mr Do's estate or would probably have been available to creditors if the property had not been transferred; and
(b)if Mr Do's main purpose was to prevent the $30,000 from becoming divisible amongst his creditors, or to hinder or delay the process of making property available for division among his creditors.
131.As for the first matter, the Court would conclude that had the $30,000 not been transferred, it would have been part of Mr Do's estate.
132.As for the second matter, s 121(4A) creates a rebuttable presumption of insolvency as per s 128B(5), and s 121(2) is a deeming provision as per s 128B(2). Thus, the analysis as to those matters in respect of the third element of s 128B(1)(c) applies (see above). The Applicants also submit that the same conclusion would be reached irrespective of the presumptions, on the evidence, for the same reasons as submitted above.
Conclusion as to payments made to the Third Respondent
133.For these reasons, the relief sought in [60](e) and (g), or alternatively (f) and (g), should be granted.
Gozzard Street Property
134.In respect of the Gozzard Street Property, the Applicants' case is that, under s 239 of the Civil Law (Property) Act, this was a disposition of property with an intent to defraud creditors.
Factual matters relevant to state of mind
135.As at early February 2010, Mr Do had pressures arising in respect of ATB:
(a)He was the sole director of ATB.
(b)It was a start up builder, in the construction industry.
(c)It only had one client for whom it completed works, Ms Trinh.
(d)This was obviously risky in a commercial sense. Any problems with her financial position could result in a cash flow issue for ATB, and claims by subcontractors.
(e)In the event of difficulties, ATB would have obvious problems in agitating any contractual rights due to the personal relationship. The possibility of recourse against Ms Trinh (eg a garnishee order following a judgment, or possession and sell of house) was obviously problematic - including because Mr Do was (and is) still living in the house with their children.
(f)Mr Do was not keeping up with his tax lodgement obligations ([43] above).
136.Also around February 2010, Mr Do was facing pressures in respect of the lease and his guarantee:
(a)On 24 Aug 2009, he referred to an economic downturn and 5 other dentists in the area ([26] above).
(b)On 29 September 2009, he stated that the dental market was more competitive now ([27] above).
(c)During 2009/2010 financial year, the 3rd Respondent only worked a part-time basis. Mr Do also gave instructions to Vincents that (as one might expect) the revenue of the business dropped significantly.
(d)He had given the personal guarantee in respect of the lease, which as at 2009 to February 2010 had around 4-5 years to run.
Analysis
137.Section 239 provides as follows:
Voluntary dispositions to defraud creditors voidable
(1)A disposition of property made with intent to defraud creditors is voidable by a person prejudiced by the disposition.
(2)However, this section does not apply to an interest in property disposed of to an honest purchaser who did not have, at the time of the disposition, notice of the intent to defraud creditors.
(3)This section applies to a disposition of property made before or after the commencement of this section.
138.Section 239 is a broad provision. In Hall v Poolman (2007) 215 FLR 243, [2007] NSWSC 1330 at [550], Palmer J made these observations in respect of the analogue in the NSW Conveyancing Act:
The purpose of s 37A is to defeat fraud no matter by what device it is implemented. The reach of the section is not foreshortened by technical obstructions placed in the way of recovery proceedings in furtherance of the original fraudulent intent. The words of the section are of the widest possible application; they focus on the effect of what is done, not on the means by which it is done. The word "alienation" encompasses every conceivable means whereby property might be removed from the reach of a person's creditors. The section does not say that the alienation must be by the act of the fraudulent debtor.
139.Section 239 is engaged "although there existed no creditors at the date of conveyance, so long as the intent to defeat future creditors be made out" Barton v Deputy Federal Commission of Taxation (1974) 131 CLR 370 at 374.
140.In Marcolongo v Chen (2011) 242 CLR 546 at [28]-[34], French CJ, Gummow, Crennan and Bell JJ made observations as to the mental state required by the section. The Court of Appeal, in the decision appealed from, as recorded at [31], had imported a requirement of an actual or real intention to defraud, or some element of dishonesty.
141.This reasoning was rejected by their Honours at [32], saying (bold added):
However, in response Mrs Marcolongo correctly relies upon a statement by Blanchard and Wilson JJ when considering the comparable New Zealand legislation in Regal Castings Ltd v Lightbody. Their Honours said that it was unnecessary to show that the debtor wanted creditors to suffer a loss or that the debtor had a purpose of causing loss: it was necessary to show the existence of an intention to hinder, delay or defeat creditors and in that sense to show that accordingly the debtor had acted dishonestly. Mrs Marcolongo correctly relies also upon the observation by Russell LJ when considering s 172 of the 1925 Act in Lloyds Bank Ltd v Marcan (96). His Lordship said:
"I am not sure what is meant by a perfectly innocent defeat, hindrance or delay. It must be remembered that in every case under this section the debtor has done something which in law he has power and is entitled to do: otherwise it would never reach the section. If he disposes of an asset which would be available to his creditors with the intention of prejudicing them by putting it, or its worth, beyond their reach, he is in the ordinary case acting in a fashion not honest in the context of the relationship of debtor and creditor. And in cases of voluntary disposition that intention may be inferred ... The intention of Mr Marcan is perfectly plain: the lease to his wife was designed expressly to deprive the bank of the ability to obtain the vacant possession to which the bank plainly attributed value, and to diminish to that extent the strength of the bank's position as creditor. To take that action at that juncture, in my judgment, was, in the context of relationship of debtor and creditor, less than honest: it was sharp practice, and not the less so because he was advised that he had power to grant the lease. It was, in my judgment, a transaction made with intent to defraud the bank within s 172, and would have been within the [Elizabethan Statute]."
142.That is, the "intent to defraud" is not an intent to commit an act of fraud - it is only an intent to hinder, delay or defeat creditors.
143.While each case must, of course, turn on its own facts, in PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 523 "[t]ypical examples are transfers of property to the debtor's wife, transfers to a trustee to hold for the debtor" - the latter of which is very similar to this case.
144.Here, the matters referred to at [135]-[136] favour an inference that Mr Do's actions, in purchasing the Gozzard Street Property in the name of the ASF rather than his own name, was an act which was intended to hinder, delay or defeat his future creditors.
145.Section 239 is therefore engaged.
Laches
146.Do Construction's opening outline indicates it will rely on the equitable defence of laches.
147.This is misconceived for a number of reasons.
148.First, laches is only available as a defence to equitable, not legal claims: Sze Tu v Lowe (2014) 89 NSWLR 317, [2014] NSWCA 462 at [414]. The claims brought here are under the Bankruptcy Act and the 2006 Act. They are not equitable claims - such as the claims for breaches by directors of fiduciary duties they owe companies, the subject of determination in Gerace v Auzhair Supplies Pty Ltd (2014) 87 NSWLR 435 (see eg [2] as to the description of the claims).
149.Secondly, laches is not a defence which merely operates where there has been a delay.
150.In Gerace at [73] the defence was described as follows:
The doctrine of laches is directed to a broader and different question. That question is whether, as between the parties, it would be practically unjust to give relief which otherwise would be just. In answering that question, account is taken of the length of any delay, the nature of acts done during the period of that delay, whether the plaintiff had sufficient knowledge to justify the commencement of proceedings, whether there has been prejudice to the defendant or others and the nature of the relief claimed: see Lindsay Petroleum Company v Hurd at 239-240. That doctrine does not focus on circumstances that would justify not permitting the statute to be relied on because there has been fraud or mistake or misrepresentation or other conduct or circumstances against the consequences of which equity relieves.
151.In Sze Tu v Lowe at [415], Gleeson JA observed that the defence requires (i) knowledge of the wrong; (ii) delay; and (iii) unconscionable prejudice caused to the opponent by the delay. None of the elements can be made out here. In particular:
(a)There can be no sensible suggestion that the Applicants had knowledge of the transaction and sat on their hands - at all - much less for an unconscionable period of time. They became trustees on 30 September 2016 (LS1, Tab 14, p 523). And the only source of their knowledge could come from Mr Do. Not having received a Statement of Affairs despite requests, they promptly wrote to Mr Do on 5 January 2017 (Bundle, Tab 14, p 125). Not having received any information, an AFSA notice was issued on 29 March 2018 (Bundle, Tab 7, p 49). Not having received any response, Mr Do was examined on 9 May 2018 (LS1, Tab 12, p 383). Not having received any documents, they sent a letter of demand on 8 August 2018 (LS1, Tab 26, p 692). Then they commenced these proceedings in 2019.
(b)While the defence has not yet been developed by the Respondents and may need to be addressed further in reply submissions, merely because the impugned transaction happened a long time ago does not mean there has been delay by the Applicants.
(c)To say that this sequences of events shows any delay, or permits a claim of laches, is, respectfully, misconceived.
(d)Putting that to one side, there is no evidence of any prejudice at all, much less unconscionable prejudice, caused to Do Construction by the delay. It is to be recalled that Do Construction is the trustee of a SMSF, whose role (in respect of the Gozzard Street Property) is essentially to hold and manage it. There is no change in circumstances that is (or could be) suggested in the evidence. In Sze Tu v Lowe the death of two witnesses and the loss of documents was relied on (at [423]), but that was insufficient. There is no evidence - at all - in this case as to Do Construction suffering any prejudice.
152.Thirdly, the defence all faces a "clean hands" issue: for the Court to be considering laches, a necessary hypothesis is that the claim has been made good, from which it would follow that the transaction was entered into with intent to defraud creditors. A Court of Equity would not release a defendant from the consequences of such a transaction by reason of laches in those circumstances.
153.It follows that laches cannot be made good.
154.An order lies against Mr Do / Do Construction to make the property available to creditors (see eg the form of order in Nguyen v Corbett (No 2) [2018] NSWSC 441, and [26]-[28]).
First Respondent’s primary submissions
Moreover, given the period of at least 5 years between the purchase of this property and the date of the bankruptcy, in the light of the evidence just confirmed, it would effectively require the Trustee to establish that Mr Do quite plainly had specific intent to purchase the property using the ASF as a convenient ruse and vehicle for his own benefit. Given the evidence of Mr Romano in particular, there can be no doubt that the property was purchased by, using its own funds, and in the name of, the ASF.
Any relevant inferences against Mr Do regarding his “main purpose” of the purchase to defeat creditors, on the very limited evidence before the Court, including the time between the purchase and the date of bankruptcy, and given the requirement of “clear or cogent or strict proof” (Kamy Saeedi at [155]), this aspect of the Trustee’s claim cannot be made out. In addition to these reasons, I accept the submissions of the Second Respondent in relation to this purchase.
This part of the Applicant’s claim as against the Second Respondent must therefore be dismissed. The Applicant should pay the Second Respondent’s costs, either as agreed or taxed. The other parts of the Trustee’s claim are more problematic in the sense that there are many more and problematic variables to consider, not the least of which was the evidence of Mr Do himself.
Payments to the ASF & to Ms Trinh
Rather than set out again the comments by the High Court in Cummins, and by two Justices of the Federal Court of Australia (Katzmann and Flick JJ) in, respectively, Kamy Saeedi and Warner, I simply remind myself of the cautions set out in those judgments that are recorded earlier in these reasons. It is critical to do so because of the alarmingly problematic evidence of Mr Do, and the equally alarming lack of documents, other than a range of bank statements regarding the contents of which Mr Do professed a surprising, and concerning, lack of information and general knowledge. The issue of lack of records is directly relevant to s.128B(5) and the rebuttable presumption of insolvency.
I have stated already in these reasons, more than once that, for my part, it was regularly quite difficult to discern whether Mr Do was genuinely (a) misunderstanding relatively straight-forward questions that were put to him about his financial affairs, (b) having difficulty recalling matters from some years ago, (c) feigning various, and to varying degrees of, lack of recollection of events and transactions involving significant amounts of money, or (d) otherwise undertaking some exercise in, and degree of, obfuscation. When being questioned by Counsel for the Trustee, his evidence was noticeably faltering, imprecise, lacking in recollection and remarkable for both his lack of apparent interest in his financial affairs, and equally remarkable apparent lack of comprehension about quite straight-forward matters. Yet when questioned by his own Counsel, and Counsel for the Second Respondent, his comprehension and apparent ease of recollection and response improved markedly. In short, I found Mr Do’s evidence to be not only difficult and unreasonably imprecise, it was also regularly lacking in basic credibility, particularly regarding his lack of recollection about such significant amounts of money flowing through his various bank accounts. Put another way, from an evidentiary perspective, Mr Do was his own worst enemy.
A further, complicating factor regarding the evidence was that no submission was made by the Trustee regarding the paucity of evidence from Mr Do’s accountant, upon whose advice regarding contributions to the superannuation funds Mr Do purported to rely and act. This lack of, and lack of reference to, potentially corroborating or supporting evidence, was surprising, and unexplained.
Payments during the financial year ending 30th June 2013
I note the following as formal findings:
(a)In Mr Do’s final submissions (par.56), he acknowledged that at the time the “dental premises” were abandoned in June 2013, he had a potential or impending liability as a guarantor of the lease for those premises. If he had such a concern or apprehension in 2013, it is difficult to see how he would not have had it, for example in 2010, when the questions about the viability of the dental practice and the lease relating to it, arose and were the subject of significant correspondence between Mr Do and the landlord. That said, there is a reasonable amount of correspondence in evidence between Mr Do and the landlord indicating that discussions between the relevant parties was ongoing, with both looking for, and proposing alternative means, to resolve the difficulties regarding the premises and the lease;
(b)I do not accept his contention that he did not know of (or have explained to him earlier) his potential liability under the guarantee which he executed in relation to the lease. On his own evidence, as an engineer, a long-time public servant, and admittedly neophyte small business operator, I have the greatest difficulty in accepting that he would not be properly, prudently or reasonably precise and attentive to important details (e.g. his potential liability under the lease, as guarantor, should there be any relevant default) in all of his dealings regarding his financial affairs. Mr Do’s submission (par.53) regarding his lack of awareness of the full effect of the guarantee is unsupportable. It is akin to “ignorance is bliss” defence.[46] In my view, it is even more implausible that he was unaware of, and/or unconcerned about, the very large sums of money flowing through his bank accounts over the years between July 2012 and June 2015;
(c)It cannot be doubted that, prior to 2012, Mr Do had a history of making regular payments into his superannuation fund, some of which, for example in the year ending 30th June 2010, were large ($450,000). But again, the source and general provenance of these sums was also opaque as it was in relation to the payments that are the subject of the Trustee’s claim here.
[46] Although in the criminal context, the High Court has disputed that ignorance is a relevant defence. See the comment of Gleeson CJ and Kirby J in Ostrowski v Palmer (2004) 218 CLR 493 at [1].
Summarised, the Trustee’/s contentions regarding the 2012-2013 contributions by Mr Do to the ASF, rely essentially upon the lack of relevant explanation and lack of documents (other than bank statements) for the transfer of significant funds during the relevant period.[47] Although set out earlier in these reasons, it is important to record again pars.50 – 51 of those submissions:
(50) Those payments were made as part of an extraordinary sequence of movement of very large sums of money through 2 different CBA accounts – totalling over $2 million in around 18 months, just looking at transfers over $20,000 (as per a separate chronology handed up shortly prior to the luncheon adjournment on day 1).
(51) How Mr Do obtained sufficient funds to make those payments cannot be reconciled with his tax returns, which show no income other than a comparatively modest amount from a trust.
[47] See pars.49 – 57 of the Trustees final submissions, filed 4th June 2021.
Then followed a series of submissions (pars.52 – 53 and 57) regarding Mr Do not providing relevant documents sought by the Official Receiver.
However, having regard to the strict terms of s.128B(1)(c), and the requirement, as detailed by Katzmann J in Kamy Saeedi at [155], of “clear or cogent or strict proof”, what seems, on the one hand, remarkably large sums of money, but on the other hand, apparently large amounts of negligence and incompetence in the management of his financial affairs, does not, without more, constitute the relevant standard of proof required. Put another way: just because large sums of money are involved, and just because various documents (other than bank statements) were not produced, does not, of itself, constitute the requisite intention relevantly to establish that Mr Do’s “main purpose” was to prevent the transferred property from becoming available or divisible for his creditors. This is especially so having regard to his history, for some years prior to the impugned transactions, of regularly contributing funds to his superannuation fund. This history would relevantly satisfy the terms of s.128B(3)(a) of the Act.
In Kamy Saeedi, Katzmann J said, at [156]:
Ultimately, while the circumstances surrounding the transfer are highly suspicious and while Mr Adzic might well have been actuated by a desire to prevent, hinder or delay the process of making the Property available for division amongst his creditors, I am not satisfied that this was Mr Adzic’s main purpose. This aspect of Mr Lo Pilato’s case is based on indirect inferences and innuendo. He has not discharged his onus of proof.
Her comments apply, in a similar way here, to the actions of Mr Do – highly suspicious, perhaps some level of relevant intent or desire – however, the actual proof required for the purposes of the Act (s.128B in particular), in my view, is not made out in relation to the payments made to the ASF for the financial year ending 30th June 2013. Put another way, but for Katzmann J’s typical direct and crystal clear statements noted from Kamy Saeedi, it is more likely than not that the impugned payments for the financial year ending 30th June 2013 would be recoverable by the Trustee.
But this is not the end of the story. There must be a consideration of the operation of s.128B(5) and the deeming provisions in s.128B(2). It will be recalled that s.128B(5) provides for a rebuttable presumption of insolvency on the following bases:
(5) For the purposes of this section, a rebuttable presumption arises that the transferor was, or was about to become, insolvent at the time of the transfer if it is established that the transferor:
(a) had not, in respect of that time, kept such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor’s business transactions and financial position; or
(b) having kept such books, accounts and records, has not preserved them.
Three things may be stated with some confidence.
First, in the course of Mr Do’s cross examination (with relevant details set out earlier in these reasons), he consistently confirmed that he had no recollection about the provenance of the significant amounts deposited in his various accounts, or any documents regarding them. He did not know, and/or could not explain, where the funds came from or where they went. Nor did he have any recollection or knowledge of any documents relating to the disposal or dispersion of them.
Secondly, in earlier examinations of him, for example by the Trustee, and in earlier written notice/request given to him by the Trustee, Mr Do was put on notice of specific areas of interest and specific documents required regarding same.[48] As the cross examination details in the current proceeding set out earlier in these reasons made plain, (a) Mr Do had no recollection (or knowledge) about any of the transactions he was taken to via reference to his bank statements, and (b) he had no recollection (or knowledge) about, and did not produce any documents in relation to, any of the said transactions, other than his bank statements.
[48] Among other things, see the Transcript of Mr Do’s examination by the Liquidator of ATB on 19th July 2012 (Tab 8 of Ms Sijabat’s Affidavit, filed 30th October 2019), and the Transcript of his examination on 9th May 2018 by the Official Receiver (Tab 12 of Ms Sijabat’s same Affidavit). See also the letter from Mr Do’s Trustee, Mr Combis, dated 8th December 2018 seeking documents and information for the preparation of a Statement of Affairs (Tab 15 to Ms Sijabat’s Affidavit).
It must follow from these earlier examinations and requests for information that Mr Do must have known the kinds of information and documents that were being sought by the Trustees. There was no evidence that, between any of these examinations or requests for information, Mr Do undertook any relevant inquiry either to obtain information and or documents that were so earnestly sought by the Trustee. As his own evidence at the hearing before this Court confirmed, he had neither knowledge of, nor documents that relevantly assisted either him, the Trustee, or the Court in relation to, any of the impugned transactions. Nor did Mr Do have any explanation why this was so. The documents and information sought must have been, at some stage, relevantly in his possession or knowledge. The most basic information regarding the impugned transactions was set out in his bank statements. His lack of information, lack of recollection, and lack of supporting documents regarding those transactions, left a gaping hole in his evidence, and to a significant degree in his credibility.
Thirdly, the subject of “record-keeping” in sub-section 128B(5) was clearly a vexed issue both factually and legally. Factually, as already noted, apart from his bank statements, Mr Do confirmed that he had no relevant records and had no recollection of any of the significant and other sums set out in the bank statements annexed to his Affidavit and upon which he asked many questions, regrettably, to little effect and even less illumination.
The Applicant Trustee confirmed in written submissions that there was no relevant authority regarding the duty on a bankrupt to keep “such books, accounts and records as are usual and proper in relation to the business carried on by the transferor and as sufficiently disclose the transferor’s business transactions and financial position, or … who has not preserved them.”
Regarding “the business carried on by the transferor”, for current purposes, the range of companies, trusts and other interests in which Mr Do had a relevant interest, one need look no further than the list of such entities set out in Mr Combis’ letter to Mr Do, dated 8th December 2018, noted above, which is Annexed at Tab 15 to Ms Sijabat’s trial Affidavit.
The following general principles, in my view, may be analogously applied from the area of record-keeping and financial records as applied by the Courts in matters involving corporations. As with any analogy, one must be careful to ensure that too strict an application from another area of discourse is not applied to the matter at hand.
Without needing to set out the relevant provisions from the Corporations Act2001 (Cth) in detail, or from other legislation, it is sufficient to note the following.
For example, s.286 of the Corporations Act, as part of Part 2M.2, provides basic requirements regarding financial records and record-keeping. Those records must (a) correctly record and explain its transactions and financial position and performance; and which (b) would enable true and fair financial statements to be prepared and audited. These matters were considered by the High Court in Federal Commissioner of Taxation v Consolidated Media Holdings.[49]
[49] See Federal Commissioner of Taxation v Consolidated Media Holdings (2012) 250 CLR 503 at [29] and [44].
The accent on (i) correct records, (ii) explanation of transactions and (iii) the disclosure of the true financial position of the person or entity in question, are perhaps the most crucial principles relevant to the current matter.
In one of the many cases that arose during the litigation involving the One.Tel organisation in the early part of this millennium, a decision in the Supreme Court of New South Wales discussed at length (as were most judgments in this litigious saga) the reception of documents, consideration of their provenance, the probative value, and the authentication, of them.[50] From this case of ASIC v Rich, it is sufficient to note the important caution expressed by the Court there regarding the drawing of inferences.
[50] See Australian Securities and Investments Commission v Rich (“ASIC v Rich”) (2005) 191 FLR 385; 216 ALR 320 at [117] – 119], [131], and [296] – [298].
In many ways, the situation here is somewhat easier simply because of the complete absence of relevant documents (or any other information, other than bank statements) regarding Mr Do’s significant transfers of funds. The deficits regularly referred to here made the clarification and determination of his “true financial position” almost impossible. The fault for this was completely the responsibility of Mr Do.
Finally, should it need to be recorded, the relevant assessment is, strictly speaking in the context of corporations and taxation law, an objective assessment of the requirements for the keeping of relevant financial records.[51] In my view, the same objective standard should apply to individuals, which is also to say that a simple, subjective assessment (in this instance, by Mr Do) of his or her financial position is more likely than not to be either inaccurate, and/or unreliable. This must clearly be the case with Mr Do. Viewed objectively, his evidence was either or both inaccurate and or unreliable regarding his true financial position, especially since he provided no documents at all even after he was put on notice by the Trustee about what was required, and the importance of providing them.
[51] See Australian Securities and Investments Commission v Godfrey (2017) 354 ALR 536 at [37].
In the light of the outline of principle to which I have referred in the paragraphs above, the lack of information – oral and documentary – must lead to Mr Do financially condemning himself. The glaring lacunae in his evidence in this regard, in my view, readily satisfies the requirements of the deeming provisions in s.128B(5) such that the rebuttable presumption of insolvency applies. Otherwise, and in addition to these reasons, I accept the Applicant’s submissions in this regard set out earlier in these reasons. Accordingly, the relief sought by the Trustee regarding the funds referred to regarding the financial year ended 30th June 2013 should be granted.
The Financial Years ended 30th June 2014 and 2015
First, whatever may have been able to be inferred from Mr Do’s conduct in earlier years, in my view, he is unable to dispute that, following the closure of the dental practice and the vacating of the premises used by it in or by June 2013, he was clearly on notice of his potential liability under the guarantee he signed in relation to the lease of those premises. Later that year, the Liquidator of ATB commenced proceedings against Mr Do. His correspondence with the landlord confirmed that he had no income and, in his words, he was “living on debts.”[52] In October 2014, he settled the claim with the Liquidator of ATB for $20,000.
[52] See the Applicant’s closing submissions at pars.58 – 71 and the references there given.
Secondly, ultimately, Mr Do was pursued by the landlord under the guarantee, the bankruptcy notice having been served on 13th May 2016. A creditor’s petition was filed on 27th July 2016, and he was declared bankrupt on 30th September 2016.[53] Mr Do’s evidence that he was suffering from various maladies at this time, with no medical evidence provided, assists him not at all in this regard. This aspect of his evidence was most unconvincing. For someone who had so consistently had access to very significant funds prior to this time, and in the absence of any relevant explanation, it was inexplicable how and why he would not otherwise defend this claim from the landlord. In such circumstances, in the face of the impending claim against him by the landlord, in my view, it makes his payments into the ASF (albeit rather more modest than previous years) during the financial years mentioned even more problematic.
[53] The documents referred to here are annexed to Ms Sijabat’s Affidavit at Tabs 13 and 14.
Thirdly, faced with the imminent threat of action by the landlord, Mr Do’s evidence that his payments were to secure his future and to enable him to pay for medical expenses relating to his sleep apnoea, in my view, was also rather problematic. Among other things, how and why someone seeking to provide for their future medical expenses would choose to place funds into a self-managed superannuation fund, as opposed to some other more readily accessible deposit facility remains something of a mystery.
In these circumstances, in my view, the Court may reasonably infer, for the relevant financial years ended 30th June 2014 and 2015, that Mr Do’s main purpose was to place the funds transferred during those years, beyond the reach of his creditors. This being the case, it is unnecessary to consider the arguments regarding presumptions and deeming that arise under s.128B(5). However, and in the alternative, for similar reasons to those regarding the impugned transactions for the financial year ending 30th June 2013 set out above, and in particular the complete lack of information and relevant records, the deeming effect of s.128B(5) should apply here also to the financial years in question.
The final matter to consider relates to the payments to Ms Trinh on 28th July 2015 in the sum of $30,000. The payments are admitted by Mr Do in his Defence. As earlier recorded, the Third Respondent (Ms Trinh) filed no evidence or put on a Defence. Here, the Trustee relies upon s.120(1) and s.121 of the Act, which are in the following terms:
(1) 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.
Section 121 relevantly provides as follows:
(1) 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 property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and
(b) the transferor’s main purpose in making the transfer was:
(i) to prevent the transferred property from becoming divisible among the transferor’s creditors; or
(ii) to hinder or delay the process of making property available for division among the transferor’s creditors.
Note: For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.
Showing the transferor’s main purpose in making a transfer
(2) The transferor’s main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.
Other ways of showing the transferor’s main purpose in making a transfer
(3) Subsection (2) does not limit the ways of establishing the transferor’s main purpose in making a transfer.
Mr Do claimed that the payments to Ms Trinh were as a result of an overpayment by her and the repayment of a loan. Apart from Mr Do’s evidence, there is nothing to support these contentions. Given the lack of production of any supporting documentation, Mr Do’s generally problematic evidence, and given the lack of engagement by the Third Respondent, Ms Trinh, in my view, the claim by the Trustee must succeed here also. The submissions of the Trustee are accepted (pars.112 – 133 of the Applicant’s closing submissions).
In relation to costs, as noted earlier, the Second Respondent’s costs should be paid by the Trustee regarding the failed Gozzard Street property claim. Regarding each of the other claims, in my view, the First Respondent should pay the Trustee’s costs, either as agreed or taxed.
In the light of the Court’s conclusions, within 14 days, the parties are to provide Chambers with Short Minutes of Order to give effect to these reasons.
I certify that the preceding one hundred and thirty-six (136) numbered paragraphs are a true copy of the Reasons for Judgment of Judge W J Neville. Associate:
Dated: 14 December 2021
Annexure A
In the matter of the Bankrupt Estate of Tien Dung Do
Federal Circuit and Family Court of Australia, CAG 74 of 2019
Submissions by parties in response to communication from the Court dated 29 September 2021The Applicant’s submissions
The First Respondent’s submissions
The Second Respondent’s Submissions
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