Background
George Lu came to Australia in 1985 and became an Australian citizen in 1988. He worked as general manager of Foxville Projects Group and Global Projects from 2010 to 2025. These companies, part of a larger construction group, experienced severe financial difficulties attributed to COVID-19 lockdowns, increased labour costs following a union enterprise bargaining agreement, and significant losses on New South Wales metro projects. Both companies entered liquidation in 2024–2025.
During his employment, Lu provided personal guarantees totaling approximately $10.8 million to Assetinsure, Judo Bank, and Cavan Glass and Aluminium. Unable to satisfy these liabilities, Lu filed for bankruptcy on 4 February 2026. He and his wife Jennifer Diep established Active Super No. 1 Fund on 12 November 2012, with Active Super No. 1 Pty Ltd as trustee. The fund is a compliant self-managed superannuation fund with approximately $433,765 in assets and only Lu and his wife as members and directors.
As an undischarged bankrupt, Lu was disqualified from managing corporations under the Corporations Act and from acting as a responsible person in relation to superannuation funds under the Superannuation Industry (Supervision) Act 1993. He sought court orders permitting him to manage Active Super and declaring he was not a “disqualified person.”
The Court’s Holding
Justice Halley addressed two principal issues. First, whether the Federal Court has power under s 126J(1)(b) of the SIS Act to declare a bankrupt is not a disqualified person when the fund’s regulator is the Commissioner of Taxation (not APRA). The court held that it does possess this power. Although s 126G states that Subdivision B applies only where the Regulator is APRA, the proper interpretation is that APRA alone can apply for disqualification orders; however, disqualified persons may seek declarations of non-disqualification regardless of their regulator. This interpretation avoids absurd consequences: a bankrupt could not otherwise challenge disqualification to manage their own self-managed fund, while the legislative scheme contemplated such relief.
Second, the court addressed whether to exercise its discretion to grant the orders. Applying established principles from Frigger and other authorities, the court considered the protective—not punitive—nature of disqualification provisions, the minimal risk profile of Active Super (a small family fund with no external creditors or employees), the absence of opposition from the Bankruptcy Trustees and ASIC, Lu’s cooperation with his trustees, and conditions limiting Active Super’s activities to trustee functions only. The court found these factors supported granting leave.
Key Takeaways
- Courts may declare that bankrupts are not “disqualified persons” under the SIS Act even when the Commissioner (not APRA) is the relevant regulator, clarifying an apparent gap in statutory relief mechanisms.
- The restrictive language in s 126G of the SIS Act applies only to limit APRA’s authority to apply for disqualification orders, not to restrict disqualified persons’ right to seek court declarations.
- Permission to manage a self-managed superannuation fund may be granted where the fund is small, compliant, has no external creditors, and the applicant demonstrates cooperation with insolvency trustees and acceptance of conditions limiting corporate activities.
Why It Matters
This decision resolves conflicting statutory provisions in the SIS Act and confirms that bankrupts are not permanently barred from managing their own self-managed superannuation funds. The holding protects family superannuation interests while maintaining regulatory safeguards through court oversight and conditions. It aligns with recent Federal Court authority (notably Wake and Hunt) rejecting overly restrictive constructions that would leave self-managed fund trustees without court-based relief mechanisms.
For practitioners, the decision clarifies that applications under s 206G of the Corporations Act and s 126J of the SIS Act may proceed concurrently, and that courts will impose protective conditions (such as restricting corporate activities) rather than categorically denying relief. The judgment also confirms that the absence of opposition from ASIC and the Bankruptcy Trustees, while not determinative, supports exercise of discretion in appropriate cases.