Roufeil as Trustee of the Bankrupt Estate of Tarrant v Tarrant Enterprises Pty Ltd as Trustee for the MRT Family Trust

Roufeil as Trustee of the Bankrupt Estate of Tarrant v Tarrant Enterprises Pty Ltd as Trustee for the MRT Family Trust [2023] FCAFC 142
Full Court of the Federal Court of Australia
Derrington, Abraham, & Jackman JJ
Bankruptcy – a sequestration order was made against the estate of Tarrant, and Roufeil was appointed his trustee in bankruptcy – the trustee became aware that about $200,000 was transferred from a bank account held by Tarrant to a loan account at the same bank, of which Tarrant Enterprises Pty Ltd was the account holder – Tarrant Enterprises was the trustee of the MRT Family Trust, whose beneficiaries included Tarrant and his family – the trustee commenced proceedings, claiming that the payments constituted payments of money by Tarrant to Tarrant Enterprises in the circumstances set out in s120, s121 and s121A of the Bankruptcy Act 1966 (Cth), and were therefore void as against the trustee – the primary judge dismissed the proceedings – the trustee appealed – held: if analysed as a matter of contract, it is correct that what may appear to be a simple transaction, with value being passed from one bank customer to another bank customer, is in fact two transactions involving three parties – the bank had debited Tarrant’s account, thus reducing its debt to him, and credited Tarrant Enterprises’ account, with the effect of reducing the debt owed to the bank by Tarrant Enterprises – however, the inquiry required by s120 of the Bankruptcy Act through the use of the term “payment of money” is not a technical legal one – the concept of “payment” or “payment of money” is an ordinary English expression, which takes its meaning from ordinary usage – it was entirely appropriate to refer to a banking transaction in which value is transferred from one bank account to another as being a payment of money between the two account holders – the elements of s120(1)(a) were therefore established – it was not necessary to consider the application of s121A – r31 of the Bankruptcy Regulations 2021 (Cth), which sets out a kind of transfer of property to which s120(1) does not apply, had no application – Tarrant’s defence of double recovery was misconceived – the right of recovery which follows a successful claim under s120 is a right on the part of the trustee to recover property which the person who later becomes bankrupt has transferred – here, that was a right of recovery against Tarrant Enterprises – once recovered, there will then be questions as to the administration and distribution of that money, along with other assets – the trustee may well need to rule on a proof of debt by the bank, or make a decision on other means sought by creditors to recover from the bankrupt estate – those would be questions for another occasion – Tarrant Enterprises also had no right of set-off pursuant to s86 of the Bankruptcy Act – a liability of the bankrupt cannot be set off against a creditor’s liability under s120 or s121 to refund impugned payments, given that a liability arising from s120 or s121 is to the trustee, not as a debt due to the bankrupt but as the proceeds of the avoidance by the trustee of a preference – there is therefore a lack of mutuality in the debts sought to be set off – appeal allowed.
Roufeil as Trustee of the Bankrupt Estate of Tarrant