Gainsford v Tannenbaum

Case [2012] FCA 904

FEDERAL COURT OF AUSTRALIA

Gainsford, in the matter of Tannenbaum v Tannenbaum [2012] FCA 904

Citation: Gainsford, in the matter of Tannenbaum v Tannenbaum [2012] FCA 904
Parties: GAVIN CECIL GAINSFORD, SHIRISHKUMAR JIVAN KALIANJEE AND VINCENT TSIU MATSEPE AS JOINT TRUSTEES IN THE INSOLVENT ESTATE OF BARRY DEON TANNENBAUM v BARRY DEON TANNENBAUM
File number: QUD 216 of 2012
Judge: LOGAN J
Date of judgment: 24 August 2012
Catchwords:

PRIVATE INTERNATIONAL LAW – bankruptcy and insolvency – cross-border insolvency – foreign insolvency proceedings – application for recognition of foreign main proceeding pursuant to the Cross-Border Insolvency Act 2008 (Cth) and the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law – individual’s centre of main interests – presumption that individual’s centre of main interests is “habitual residence” – application of presumption – individual not habitually resident in foreign jurisdiction – application for recognition of foreign main proceeding dismissed

PRIVATE INTERNATIONAL LAW – bankruptcy and insolvency – cross-border insolvency foreign insolvency proceedings – application for recognition of foreign non-main proceeding pursuant to the Cross-Border Insolvency Act 2008 (Cth) and the Model Law on Cross-Border Insolvency of the United Nations Commission on International Trade Law – individual’s “establishment” – requirement for inter alia “place of operations” in foreign jurisdiction not satisfied – application for recognition of foreign non-main proceeding dismissed

BANKRUPTCY AND INSOLVENCY – jurisdiction and powers of courts in bankruptcy – assistance to courts of other nations exercising an insolvency jurisdiction –bankrupt resident in Australia – letter of request from foreign court not a “prescribed country” for the purposes of s 29(2)(a) of the Bankruptcy Act 1966 (Cth) – judicial discretion per s 29(2)(b) Bankruptcy Act 1966 (Cth) – provision of assistance granted

Legislation: Bankruptcy Act 1924 (Cth) s 22
Bankruptcy Act 1966 (Cth) ss 29, 81
Corporations Act 2001 (Cth) ss 9, 416, 601CL
Cross-Border Insolvency Act 2008 (Cth) ss 6, 10, 13
Vienna Convention on the Law of Treaties 1969 [1974] ATS 2, Art 32
Federal Court (Bankruptcy) Rules 2005 r 14.03
Insolvency Act 1936 (South Africa) ss 16, 20, 23, 152
Cases cited:

Ackers v Saad Investments Company Ltd (in liq) (2010) 190 FCR 285 considered
Ayres v Evans (1981) 56 FLR 235 cited
Basingstoke v Groot [2007] NZFLR 363 cited
Cambridge Gas Transport Corporation v Official Committee of Unsecured Creditors of Navigator Holdings plc [2006] 3 WLR 689 cited
LK v Director-General, Department of Community Services (2009) 237 CLR 582 applied
Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 231 CLR 1 cited
NBGM v Minister for Immigration and Multicultural Affairs (2006) 231 CLR 52 cited
Re Ayres; Ex parte Evans (1981) 51 FLR 395 applied
Re Loy 380 BR 154 (Bkrtcy ED Va 2007) considered
Re Stanford International Bank [2011] Ch 33 not followed
Russell v Federal Commissioner of Taxation (2011) 190 FCR 449 considered
Williams v Simpson [2011] 2 NZLR 380 followed

Ho, LC (General Editor), Cross-Border Insolvency A Commentary on the UNCITRAL Model Law

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AGLC
Gainsford v Tannenbaum [2012] FCA 904
Case
[2012] FCA 904
Decision Date

CaseChat Overview and Summary

In the matter of Gainsford and others v Tannenbaum, the Federal Court was presented with a case involving allegations of fraud and misappropriation of funds by Mr Tannenbaum, a South African citizen who had raised substantial funds in South Africa under the guise of a pharmaceutical investment scheme. The applicants, represented by Mr McQuade, sought various orders against Mr Tannenbaum for his alleged involvement in a fraudulent scheme where he raised funds under false pretenses, using the funds for personal expenses and investments in Australian companies, notably Bartan Group Pty Ltd and Bardeb Nominees Pty Ltd. Mr Tannenbaum, representing himself, contested these allegations vigorously.

The court was tasked with determining whether Mr Tannenbaum was liable for the applicants' claims, including whether he had engaged in a fraudulent scheme and misappropriated funds. It was also necessary to ascertain whether the court had jurisdiction to hear and determine the claims, considering Mr Tannenbaum's domicile in South Africa. Additionally, the court had to decide if certain documents produced during the proceedings were admissible and if there were grounds to make orders for costs against Mr Tannenbaum.

In its reasoning, the court found that Mr Tannenbaum had indeed engaged in a fraudulent scheme, misappropriating funds raised under false pretenses. The evidence demonstrated that a negligible portion of the funds were used for their purported purpose, with the majority being diverted for personal use, including gambling and transfers to Australian companies. The court determined that it had jurisdiction over the claims, as Mr Tannenbaum's actions had a direct impact on Australian entities and residents. Regarding the admissibility of documents, the court found that the documents were relevant and admissible. As for the costs, the court found that Mr Tannenbaum's conduct warranted orders for costs against him.

The court made several orders, including that Mr Tannenbaum be liable for the applicants' costs of the proceeding and that specific documents be produced to assist in the resolution of the matter. The court also found that Mr Tannenbaum had engaged in a fraudulent scheme and misappropriated funds, establishing a clear basis for the applicants' claims.

Orders

Orders of the court

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Background

Background to the litigation

Mr Tannenbaum represented himself in the proceeding. In so doing, he displayed considerable insight into the issues at large. Those issues were the subject of detailed and helpful submissions by Mr McQuade of counsel who appeared for the applicants. Mr Tannenbaum opposed the making of any of the orders sought by the applicants.BACKGROUND IN SOUTH AFRICA The following facts are, save where another source is indicated, established by the evidence relied upon by the applicants. Mr Tannenbaum was born in South Africa on 23 January 1966. He is a citizen of that country and has been issued with a South African passport. His evidence is that he cannot now locate that passport. Between 2004 and 2009, Mr Tannenbaum raised funds in South Africa for the nominal purpose of their being invested in the local pharmaceutical industry. More particularly, investors made short term (8 to 12 weeks) advances to him for the purpose of enabling the purchase and importation into South Africa of pharmaceutical ingredients. Mr Tannenbaum was the trustee of a trust named the Frankel Trust and in that capacity owned the issued capital of a South African incorporated company Eurochemicals (Pty) Ltd, which traded under the name Frankel Pty Ltd (Frankel). The Frankel Trust was settled in South Africa. Mr Tannenbaum was and remains its sole trustee. He was also the last active director of Frankel. The funds were raised via a scheme which entailed the following, purported bases:(a)Frankel conducted a business of the bulk importing of ingredients pre-ordered by South African pharmaceutical manufacturers;(b)funds advanced to Mr Tannenbaum would, in turn, be advanced by him to Frankel; and (c)each importation would yield a substantial profit to Frankel, thereby enabling it to repay Mr Tannenbaum and, in turn, him to be able to repay each advance and, as well, to pay a high return on it. In total, Mr Tannenbaum received ZAR 3,298,924,803 (AUD 390,036,037) via this scheme between 2004 and 2009. Contrary to these purported bases and, in fact:(a)less than 0.05% of the funds advanced to Mr Tannenbaum were on loaned by him and used for the purpose of acquiring pharmaceutical ingredients;(b)of the funds received by Mr Tannenbaum:(i)some ZAR 44,822,098 was used by him for personal transactions with a substantial portion being spent on gambling;(ii)he transferred some USD 31.7 million into an account held by Bartan Group Pty Ltd (Bartan), an Australian incorporated company, with the ANZ Bank (Bartan account);(iii)he transferred some USD 14 million from the Bartan account to other entities controlled by him or to persons associated with him. The sole shareholder of Bartan is another Australian incorporated company, Bardeb Nominees Pty Ltd (Bardeb). In turn, the shares in Bardeb are held solely by Mr Tannenbaum and his wife, Deborah. Mr Tannenbaum was a director of Bartan from 3 January 2007 until 26 August 2009. He held the office of director in Bardeb from 22 December 2006 also until 26 August 2009.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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