Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni (No 2)
[2020] FCA 792
•27 May 2020
FEDERAL COURT OF AUSTRALIA
Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni (No 2) [2020] FCA 792
File number(s): NSD 162 of 2020 Judge(s): JAGOT J Date of judgment: 27 May 2020 Catchwords: BANKRUPTCY — Review of decision of trustee — Decision by trustee refusing consent for bankrupt to travel overseas — Whether Court should direct trustee to provide consent and, if so, on what conditions — Bankruptcy Act 1966 (Cth) s 272 Legislation: Bankruptcy Act 1966 (Cth) Cases cited: Dunwoody v Official Receiver [2005] FMCA 1634
Groves, in the matter of Groves (Bankrupt) v Robinson (Trustee) [2013] FCA 490; (2013) 11 ABC(NS) 467
Re Tyndall; Ex Parte Official Receiver (1977) 30 FLR 6
Tinkler v Melluish [2017] FCA 52; (2017) 14 ABC(NS) 508
Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40
Date of hearing: 26-27 May 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 33 Counsel for the Applicant: The Applicant appeared in person Counsel for the Respondent: Mr N Morcombe QC Solicitor for the Respondent: Andreyev Lawyers ORDERS
NSD 162 of 2020 BETWEEN: PETER MOLTONI
Applicant
AND: PETER IVAN MACKS AS TRUSTEE FOR THE BANKRUPT ESTATE OF PETER MOLTONI
Respondent
JUDGE:
JAGOT J
DATE OF ORDER:
27 MAY 2020
THE COURT ORDERS THAT:
1.By 10 June 2020 the applicant and respondent are to confer with a view to agreeing the form of all undertakings and orders (including as to costs and the security for costs paid) required to give effect to the reasons for judgment published today and for the respondent to decide whether he wishes to conduct an examination of the applicant before the applicant leaves Australia for the United Kingdom.
2.The agreed/disagreed orders and undertakings and notice of the trustee’s position about examining the applicant are to be filed by email to the Associate to Jagot J by 5.00pm on 10 June 2020.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
JAGOT J:
This is an application in which the applicant seeks, pursuant to s 90-15 of Sch 2 to the Bankruptcy Act 1966 (Cth) (the Act), that the Court review the respondent’s failure, or alternatively, refusal, to make a decision in relation to the applicant’s application for the respondent’s consent to overseas travel under s 272(1)(c) of the Act, and orders pursuant to s 272 authorising the applicant to take preparatory steps to leave Australia and to leave Australia and travel to and reside in the United Kingdom.
Background
The respondent, who is the applicant’s trustee in bankruptcy, by letter dated 24 February 2020, identified two substantive questions which led the respondent to the view that he ought not to permit the applicant to travel to the United Kingdom in order to reside there. In the letter dated 24 February 2020 the respondent notified the applicant in the following terms:
Are you likely to return?
I am not convinced that you will return to Australia if you are allowed to travel on the following basis:
1.You have previously provided me with selective information in response to my inquiries. A reasonable regulated debtor in your circumstances should provide fulsome and detailed explanations of certain matters. I have formed an adverse view about the extent to which you have been cooperative and therefore believe that it is highly unlikely you will return.
2.You have significant corporate interests abroad and are listed as an active Director for multiple United Kingdom companies. As I understand, an undischarged bankrupt in Australia cannot operate a company overseas. Need details only from me [sic]
3.I am satisfied that you control significant assets abroad (through various entities and intermediaries), and my investigations continue in this regard. Clearly if you control overseas assets this significantly reduces the likelihood that you will return if required.
4.You have dissipated all known Australian assets that you may have an interest in, and you intend to permanently live in the United Kingdom. This leads me to form the view that it is highly unlikely you will return to Australia.
5.In a meeting with me on 16 October 2018 (recorded with your consent), you indicated that you would attempt to breach the ATO’s departure prohibition order if I was to provide you consent to travel – thereby committing an offence under the taxation legislation. You also indicated that you have an Italian passport that may aid with your departure from the country. The strong inference to me, from your apparent desire to leave is that you will not return. Furthermore, as you are aware, I am in possession of your expired Australian passport. I have provided opportunities to renew your Australian passport, on the assumption that the passport will be surrendered to me, however you have not actioned this or followed this up with me. The assumption that I draw from this is that in the event you are permitted to travel, you intend to use your Italian passport. This further leads me to believe that you are not likely to return to Australia.
Impact on the administration of your Bankrupt Estate
I believe that allowing you to travel will hamper the administration of your Bankrupt Estate:
1.I consider you have been evasive in respect of assisting me with obtain [sic] bank records for various overseas entities that you ought to have access to. As the jurisdiction for these accounts is Luxembourg, it will be very difficult for me to access the information without your assistance, which is less likely to be offered if you are overseas. Particularly, it is not convincing that you knew nothing about Nairn Investments, however you are listed as the ‘Principal Potential Donee’ and there is no adequate explanation to this.
2.Any overseas assets that you may have are available to your Bankrupt Estate. If you are granted permission to travel to those jurisdictions in which the assets are located, you will have the opportunity to take steps to dissipate or further conceal those assets thereby significantly hampering my ability to realise those assets to satisfy the debts of your Bankrupt Estate.
3.I reaffirm my statement which is found in the AAT ‘Decision and Reasons for Decision’ dated 10 February 2020, that it is possible for the purposes of my investigations to examine you while you are overseas. However, this would be unnecessary, problematic and burdensome in those circumstances.
4.I am investigating transactions between you and third parties which may fall into the category of transactions conducted with the intent to put assets beyond the reach of creditors. Further investigation of your asset position is ongoing, with support of an indemnity from the ATO. The ATO shares my view that your travel will hamper the effectiveness of my investigations.
The parties have provided considerable assistance in their written submissions. Both parties provided a summary of the relevant facts. The respondent summarised the relevant facts as follows:
Brief background
5. The Applicant is an accountant with a specialist knowledge of offshore taxation structuring. He is a former President of the Tax Institute
6. On 22 December 2006, Maruti Holdings Ptd Limited (Maruti), a company registered in Singapore, controlled by Pankaj Oswal (Oswal), paid the amount of US$21 million (the Payment) to Sinclair Strategies Ltd (Sinclair), a company registered in the British Virgin Islands (BVI).
7. In 2012, Oswal brought proceedings on behalf of Maruti against Sinclair, the Applicant, and Michael Cahill (Mr Cahill) in the BVI for recovery of the Payment, alleging that the Payment was extorted by way of blackmail (the BVI Claim).
8. The Applicant became a director of Sinclair in 2013.
9. In 2013, the BVI claim by Maruti was summarily dismissed.
10. In September 2017, the Australian Taxation Office (the ATO) issued an amended assessment in the amount of $33,335,667 against the Applicant in respect of the Payment (the Assessment).
11. The basis of the Assessment is that Sinclair was in effect the Applicant’s company, and that the Payment was made in return for the provision of consultancy services by the Applicant in Western Australia, which he directed be paid to Sinclair. The ATO therefore treated the Payment as income of the Applicant.
12. On 22 November 2017, the ATO issued a Departure Prohibition Order (the DPO) against the Applicant to prevent him from leaving Australia
13. Throughout the period from November 2017 to October 2018, the Applicant had the following disputes with the ATO:
13.1. An AAT application for review by the Applicant of a decision by the ATO not to grant a Departure Authorisation Certificate (DAC) allowing him to travel in spite of the DPO;
13.2. An objection by the Applicant to the Assessment in the AAT; and
13.3.Debt proceedings for recovery by the ATO of the sum of $33,335,667 referred to in the Assessment in the Supreme Court of Western Australia.
14. On 11 October 2018, the Applicant appointed the Respondent as his trustee in bankruptcy. The ATO represents over 99% of the value of creditors in the bankruptcy.
15. On 8 March 2019, the Applicant filed an application in the Adelaide Registry of the Federal Court of Australia (SAD49/2019) for review of a decision by the Respondent not to allow him to travel overseas whilst bankrupt (the 2019 Application).
16. On 11 July 2019, the Applicant discontinued the 2019 Application, with an order that the Applicant pay the Respondent’s costs.
17. In mid-2019, the ATO agreed terms to fund the Respondent to investigate the affairs, and particularly overseas assets, of the Applicant.
The applicant outlined the relevant facts in these terms:
24. The relevant background facts are:
24.1. In September 2017 the Australian Taxation Office issued a notice of amended assessment to the Applicant in respect of the year ended 30 June 2007. The Applicant was residing in the United Kingdom at the time.
24.2. The Applicant met his wife Penelope (Penny) Bannister (Ms Bannister) in the United Kingdom in October 2016. They married in London on 2 December 2017. ([Affidavit of Penny] Bannister [8],[11])
24.3. The Applicant and Ms Bannister commenced renting an apartment in London on 26 June 2017. ([Affidavit of Penny] Bannister [9]).
24.4. In October 2017 the Applicant returned to Australia, in the knowledge that the ATO may issue a Departure Prohibition Order (DPO). (First Affidavit [of Peter Moltoni] [7]).
24.5. On 22 November 2017 the ATO issued a DPO to the Applicant. The DPO remains in force. (First Affidavit [of Peter Moltoni] [7])
24.6. On 27 November 2017 the ATO issued a Departure Authorization Certificate (DAC) enabling the Applicant to return to the United Kingdom and remain there until 11 March 2018. (First Affidavit [of Peter Moltoni] [7])
24.7. The Applicant returned to Australia on 11 March 2018 in compliance with the DAC. (First Affidavit [of Peter Moltoni] [7]).
24.8. As a consequence of the amended assessment referred to in paragraph 24.1 the Applicant filed a debtor’s petition on 11 October 2018; (First Affidavit [of Peter Moltoni] [6])
24.9. The Respondent was appointed trustee on 11 October 2018; (First Affidavit [of Peter Moltoni] [3])
24.10. A statement of affairs was prepared by the Applicant, reviewed by the Respondent prior to his appointment, amended by the Respondent, and filed by the Respondent on behalf of the Applicant on 11 October 2018. (First Affidavit [of Peter Moltoni] [29]).
Principles
There was no real dispute between the parties about the relevant principles. In the respondent’s written submissions it was stated that the principles in relation to whether a bankrupt should be granted consent to travel are well settled and involve the following key questions:
(1)Is the proposed travel genuine?
(2)Is the bankrupt likely to return to Australia?
(3)Will the travel hamper the administration of the bankrupt’s estate?
(4)Has the bankrupt complied with his or her obligations under the Act?
The applicant in his written submissions set out the following principles which he said were applicable to the application:
25.1. ‘It is a basic principle that a resident of Australia is entitled to expect that he [or she] may travel freely notwithstanding the fact that he [or she] is a bankrupt provided it will not lead to them staying overseas in order to defeat or delay their creditors and provided it will not interfere with the due administration of the bankrupt’s estate’ [citing Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40 at 43];
25.2. ‘Restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at ensuring the proper administration of the bankruptcy laws and of bankrupt estates under such laws and not as a penalty imposed upon a citizen as a consequence of inability to pay debts leading to the making of a sequestration order’ [citing Re Tyndall; Ex Parte Official Receiver (1977) 30 FLR 6 (Tyndall) at 15]. Where the requirements of due administration of the bankrupt’s estate are, or may be, in conflict with the right of a bankrupt to travel overseas, then a balancing exercise is involved [citing Tyndall at 10];
25.3. ‘A trustee’s decision to refuse a bankrupt permission to travel overseas is in a special category because it affects the freedom of movement of a person who may not have committed or been charged with an offence’ [citing Tinkler v Melluish [2017] FCA 52; (2017) 14 ABC(NS) 508 (Tinkler) at [19]];
25.4.Such applications ‘must always be treated as being of fundamental importance, requiring careful consideration of all relevant circumstances’ [(citing Tinkler at [19], citing Tyndall at 187)];
25.5. ‘To deny travel simply because it is only being undertaken for compassionate reasons would be an improper exercise of the discretion as it results in a punitive application of the provisions’ [citing Dunwoody v Official Receiver [2005] FMCA 1634 at [29]];
25.6. Regard should be had for the relevant decision of the trustee and the decision of the trustee need not be wrong, unreasonable, absurd or in bad faith for the court to exercise its discretion [citing Tyndall at 10].
25.7.Whilst ‘the court should not … interfere in the day-to-day administration of a bankrupt’s estate by the trustee’, an application by a bankrupt for permission to travel does not come within the day-to-day administration of a bankrupt’s estate [citing Tyndall at 10].
The applicant also pointed to a number of authorities, in particular, Groves, in the matter of Groves (Bankrupt) v Robinson (Trustee) [2013] FCA 490; (2013) 11 ABC(NS) 467 in which Logan J said at [34]:
The Act does not forbid a bankrupt from living abroad and, it must be said, from living abroad permanently. Rather, what it requires is a consent informed by whether that will or will not assist in the administration of the estate.
Consideration
Genuineness of intention
In terms of the genuineness of the applicant’s intention and wish to relocate to the United Kingdom, the evidence is strong and I accept that the reason for the proposed relocation is genuine. The evidence is that the applicant’s home is in the United Kingdom where his wife of 29 months is living and working. The applicant’s main reason for travelling is to be reunited with his wife. By reason of the constraint on him being able to travel to the United Kingdom, he and his wife have been forced to spend almost half of their married life apart. The evidence also demonstrates that the applicant is unable to engage in his chosen profession as a tax accountant in Australia, whereas he would be able to obtain employment in his profession in the United Kingdom. The evidence of the applicant’s wife can be summarised in these terms as set out in the applicant’s written submissions:
1.The forced separation from [her husband] is having a harmful effect on her emotionally, physically and financially; …
2.She returned to the United Kingdom to be near [to] and care for her aged parents; …
3.She supports [her husband’s] request for permission to travel and has [supported], and continues to support, him emotionally and financially.
The evidence also establishes that it is near impossible for the applicant’s wife to return to Australia due to her contractual commitments to work in the United Kingdom, and that further, her contract is the sole means by which she is able to financially support herself and the applicant.
In these circumstances the first relevant question may be answered in the affirmative. The applicant’s need to travel is plainly genuine.
Likelihood of return
The second question is, is the bankrupt likely to return to Australia? In this regard there is evidence that the applicant returned to Australia for his daughter’s wedding at a time when he was aware that he may be subject to a departure prohibition order (DPO) issued by the Australian Taxation Office (ATO). Nevertheless he attended his daughter’s wedding and was made subject to a DPO.
He subsequently applied for and obtained a departure authorisation certificate (DAC) from the ATO to enable him to return to the United Kingdom on the condition that he return to Australia by a specified date. The evidence is that the applicant returned to Australia in accordance with the DAC.
It is also apparent that the applicant and his wife have strong ties to Australia. The applicant’s daughter, mother and brother reside in Australia. The applicant’s wife owns a property in Australia in which the applicant is presently residing. The applicant’s wife also has relatives in Australia, being a brother. She relocated to the United Kingdom to look after her aged parents and has taken work there to support herself and the applicant.
The applicant has also said he would be willing to proffer undertakings to the effect that:
(1)He will reside in the United Kingdom;
(2)He will return to Australia with his travel and accommodation expenses to be paid for by his wife whenever the trustee requires him for the purposes of an examination;
(3)He will furnish information to the trustee of his residential address and continue to notify the trustee of any change to that residential address;
(4)He will maintain email and telephone addresses and numbers whilst abroad for the purposes of being contacted by his trustee and will notify his trustee of any change in those addresses and numbers;
(5)He will maintain an address for service in Australia for the service of notices upon him at his solicitor’s office and will notify his trustee of that address for service prior to departure from Australia; and
(6)He will furnish to the trustee an undertaking signed by him that whilst overseas he will promptly furnish such information as is requested by the trustee in the administration of the estate to the best of the applicant’s ability.
The applicant’s wife has also indicated that:
(1)She will give undertakings to the Court to pay the applicant’s travel expenses to Australia and his accommodation and living expenses whilst in Australia even when he is required to return to Australia for the purpose of public examination or for any other purpose as dictated by the trustee; and
(2)She will furnish to the trustee a signed undertaking to this effect.
I have taken into account the submissions for the respondent that the applicant has not been forthcoming in relation to his obligations under the Act. There is some force in the submission for the respondent that the information provided by the applicant thus far in the administration of his estate is incomplete. I will return to this question in more detail but for present purposes it can be accepted that there is some question whether the bankrupt has complied with his obligations under the Act.
The trustee is plainly of the view that the applicant has concealed the whereabouts of assets overseas and is concerned that if the applicant is permitted to travel to the United Kingdom he will be in a better position than he currently is to take steps to further conceal assets.
Having weighed that consideration, I am nevertheless of the view that with the protections in place which I have mentioned in the appropriate for of undertakings to the Curt, there is a low risk that the applicant is likely to do other than return to Australia when required. These protections should also include a mortgage over the property of the applicant’s wife in Australia guaranteeing an amount of approximately $500,000.
Hamper the administration of bankrupt’s estate
The evidence of the trustee essentially boiled down to the proposition that although this is a digital world in which the applicant can contact people by email and video and by other digital communication means, there are still some things that require the presence in person to achieve. Further, if the applicant has physical proximity to the United Kingdom and Europe, he will be able to take steps in person to further conceal assets. The difficulty I have with this submission is that it is highly speculative and the trustee has not provided any concrete example of anything that the applicant could do whilst in the United Kingdom, which he could not otherwise do from here in Australia.
That said, I have accepted that there are real questions about the need for ongoing investigation of the applicant’s affairs. In this regard, the trustee in the second annexure to his first affidavit set out in paragraph 34 that he had made his decision to refuse the applicant’s requests to travel for three essential reasons, as follows:
34.1The chance that the Applicant will abscond and not be available to answer questions or provide information as the investigations develop;
34.2The potential for the Applicant to dissipate or further conceal any overseas assets he possesses, particularly given the opaque jurisdictions involved including bank accounts in Luxembourg; and
34.3The probability that [the trustee] will publicly examine the Applicant once further information has been obtained.
I have considered the weight which should be given to those concerns with care because of the circumstances of the evidence, which does suggest that there are indeed matters which require further investigation by the trustee. In this regard, the evidence shows that the applicant was a director of a company, referred to as Sinclair, in 2013 when he signed an affidavit (the Sinclair Affidavit) and a defence in proceedings in the British Virgin Islands in which a Mr Oswal was suing Sinclair, Mr Cahill, and the applicant, on the basis that money had been extorted from Mr Oswal in return for the concealment of certain information.
In the Sinclair Affidavit the applicant said facts and matters deposed to in that affidavit “are true to the best of his knowledge, information and belief and are known to [him] as the director of Sinclair”. In the Sinclair Affidavit the applicant noted that Sinclair had said in its defence that a payment of US$21 million had been made to Sinclair by a company related to Mr Oswal as a result of services that were provided pursuant to a written consultancy agreement dated 18 September 2006. The evidence of the applicant was that he negotiated the terms of this consultancy agreement which provided for a payment of $5 million. There is no explanation in the evidence of why the payment that was made was US$21 million as opposed to US$5 million.
The involvement of the applicant in the dealings of Sinclair does not stop there. There is evidence of certificates issues by Sinclair to certify that a company Cosign Nominees Limited held one share in Sinclair and accompanying that is a declaration of trust by Cosign that it held its share as nominee of and trustee for another company, Nairn Investments Limited. There is another certificate certifying that Spread Nominees Limited holds one share in Sinclair with another accompanying declaration of trust to the effect that Spread Nominees held its share as nominee of and trustee for Nairn Investments.
There is also a bank account mandate by the bank, Fortis Bank (CI) Limited which identifies the relevant name of the account holding as Nairn Investments. This document then states under the heading “For Trusts – Name(s) and address(es) of the settlor and beneficiaries and protector if applicable”, and “For Corporate, Unincorporated Bodies – For unlisted companies/partnerships/unincorporated bodies, the name(s) and address(es) of the beneficial owner(s)”. The name set out underneath this entry is the name of the applicant, who is identified as “Principal Potential Donee”. The applicant’s address is also given, albeit subject to a typographical error in the street name.
Further, on 12 August 2013, the applicant sent an email to a Senior Fund Administrator – Shareholder Services of Abacus Financial Services Limited stating that:
Some time ago I contacted your office regarding transferring the unitholding from Sinclair Strategies to another of my companies.
There is another email from the applicant dated 3 March 2015 which states:
Please find the unit holding details and bank account details for M Squared Nominees Pty Ltd and Sinclair Strategies Limited.
The attachment to this email identifies the name of the participating shareholder as Sinclair Strategies Pty Ltd and has set out beneath it the name of the applicant and the applicant’s bank account details.
Further, in a letter from Intertrust, which had Sinclair as a client from 3 April 2006 to 16 October 2007, there is a statement to the effect that the applicant was not a director or a member of Nairn Investments but was the “Identified Principal Potential Donee” of Nairn Investments.
Further again, on an account form for a corporate entity, being Sinclair, there is a statement to the following effect: “investment income/consultancy fees generated in a company controlled by Fortis Guernsey for the potential benefit of the beneficial owner (principal potential donee)”.
All of these matters lend weight to the trustee’s contention, which I accept, that further investigations of the affairs of the applicant are required, and that caution should be taken to ensure that there is no hindrance of the administration of the bankrupt estate.
In his evidence, Mr Moltoni effectively denied knowledge of the documents which appeared to identify him as the principal potential donee of Nairn Investments, and Nairn Investments as the beneficial owner of Sinclair.
I do give weight to the fact that the explanations provided by the applicant of his lack of involvement with Sinclair, on their face, are not particularly convincing. But be that as it may, this must be weighed against the following facts:
(1)I have no doubt that the applicant’s reason for the proposed relocation to the United Kingdom is genuine.
(2)I am of the view that it must be accepted that the applicant’s continued presence in Australia is causing significant distress to his wife, who for personal reasons, must remain in the United Kingdom.
(3)I am persuaded that on the basis of all of the undertakings which have been proffered, the applicant is likely to return to Australia if and when required by the trustee.
(4)I am not persuaded that the applicant being permitted to reside in the United Kingdom will hamper the administration of the bankrupt’s estate. In this regard, the applicant and his wife also have strong ties to the United Kingdom, which in my view, diminishes any risk that he presents a flight risk from the United Kingdom. The fact that he has both strong ties to the United Kingdom and Australia suggest to me that it is unlikely that the applicant will take any step which prejudices his capacity to continue to reside in the United Kingdom and to return to Australia and as when he sees fit in the future.
Although I do have some doubt whether the applicant has effectively complied with all of his obligations under the Act, this is a matter which must be worked out through the process of the investigations. The trustee has indicated in his evidence that he thinks that there is about six months’ further work of investigation to be undertaken before he would be in a position to complete any examination of the applicant. To my mind, requiring the applicant to remain in Australia for a further period of six months in circumstances where his wife is in a difficult position in the United Kingdom is unreasonable and weighing up all of the relevant considerations, I consider that it is in the interests of justice and just and equitable that the applicant, subject to all of the necessary undertakings and restrictions which I have noted, be permitted to leave Australia to reside in the United Kingdom. I propose to give the parties a period of 14 days in which to confer in order to formulate a series of undertakings to the court and otherwise for the trustee to consider whether he wishes to conduct an examination of the applicant before he leaves Australia.
I certify that the preceding thirty three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate:
Dated: 27 May 2020
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