Neffati v Aravanis and Roy as Trustees of the Property of Neffati
[2018] FCCA 1966
•20 July 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| NEFFATI v ARAVANIS AND ROY AS TRUSTEES OF THE PROPERTY OF NEFFATI | [2018] FCCA 1966 |
| Catchwords: BANKRUPTCY – Application by bankrupt for review of Trustees’ non-response and subsequent refusal of consent to overseas travel – proposed travel for purposes of seeing gravely ill father and instructing lawyers in Tunisia – concern that bankrupt will not return to Australia – whether proposed travel will hamper the due administration of the estate – Trustees’ requests and parties’ conduct – bankrupt’s past non-compliance – application to be granted on conditions. |
| Legislation: Bankruptcy Act 1966, ss.5, 29, 30, 33, 81, 115, 116, 178, 272 Insolvency Law Reform Act 2016, Insolvency Practice Schedule (Bankruptcy) Sch 2, ss.5-5, 5‑15, 5-20, 5-30, 90‑15, 90-20 |
| Cases cited: Dunwoody v Official Receiver [2005] FMCA 1634 |
| Applicant: | MONCEF NEFFATI |
| Respondent: | ANDREW ARAVANIS AND RONIL PRAKASH ROY AS TRUSTEES OF THE PROPERTY OF MONCEF NEFFATI |
| File Number: | SYG 543 of 2018 |
| Judgment of: | Judge Baird |
| Hearing date: | 9 May 2018 |
| Date of Last Submission: | 9 May 2018 |
| Delivered at: | Sydney |
| Delivered on: | 20 July 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Johnson |
| Solicitors for the Applicant: | Mr Davies, Blackstone Waterhouse Lawyers |
| Counsel for the Respondent: | Mr Golledge |
| Solicitors for the Respondent: | Mr Hayter, Gills Delaney Lawyers |
ORDERS
THE COURT:
ORDERS the parties to provide to Chambers proposed short minutes of order reflecting these reasons, together with any outline of submissions not exceeding 4 pages, by 10 August 2018.
STANDS OVER the proceeding for argument regarding conditions of travel, if any, to 15 August 2018 at 2:15pm.
GRANTS liberty to apply on 3 days’ notice.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 543 of 2018
| MONCEF NEFFATI |
Applicant
And
| ANDREW ARAVANIS AND RONIL PRAKASH ROY AS TRUSTEES OF THE PROPERTY OF MONCEF NEFFATI |
Respondent
REASONS FOR JUDGMENT
Introduction
The Applicant, Mr Moncef Neffati, is a bankrupt. He seeks to travel to Tunisia. The Respondents are the current Trustees of Mr Neffati’s bankrupt estate.
Mr Neffati became bankrupt on 14 February 2013. In the ordinary course he would have been discharged from his bankruptcy in February 2016, however, further to objections by the Trustees, on 14 January 2016 his bankruptcy was extended to 15 February 2021. By operation of s.272 of the Bankruptcy Act 1966 (Cth), whilst he is a bankrupt Mr Neffati is precluded from taking any steps to travel overseas, or from travelling overseas, without the approval of the Trustees.
On 15 November 2017, Mr Neffati, through his legal representatives, lodged a request to travel overseas while bankrupt with the Australian Financial Security Authority (AFSA) and with his Trustees and sought his Trustees’ consent to travel. Mr Neffati stated on the request to travel that he wished to visit his father in Tunisia who was ill. He proposed travelling from 27 November 2017 for a month.
There is no evidence that the Trustees responded to Mr Neffati’s request to travel at that time.
Application to this Court
By application filed in this Court on 1 March 2018, Mr Neffati sought review by this Court of the Trustees’ failure, or, alternatively, refusal, to make a decision in relation to his application for overseas travel under s.272 of the Act, and orders, pursuant to s.272, authorising him to take preparatory steps to leave Australia, and to leave Australia, in the period then being “March/April 2018” for purposes set forth in the supporting affidavit, and delivery by the Trustees of Mr Neffati’s passport to him for the purposes of travel, conditional upon his undertaking to return the passport upon return to Australia.
In his affidavit in support filed with the application, consistently with his request to his Trustees, Mr Neffati stated that he wished to visit his father, then 84 years old, who was seriously ill, having suffered a stroke on 13 August 2017 which left him disabled. The medical report relating to his father dated 10 October 2017 and annexed to the affidavit stated that his father’s health was precarious and that he may die at any time.
Since the application was filed, and prior to the hearing of the application by the Court, Mr Neffati’s reasons for travel have evolved, the period for which he seeks to travel has changed, and the Trustees’ non-response to Mr Neffati’s original request has coalesced into an express opposition to his application, because, they say, of past and continuing failures to comply with his obligation to assist in the administration of his estate.
Mr Neffati seeks the Court’s review of the Trustees’ omission and now opposition to his application so as to enable him to travel to Tunisia, he now submits, for the purposes of:
(a)seeing his elderly father who is gravely ill; and
(b)to instruct lawyers in Tunisia in relation to six sets of legal proceedings now commenced by summons issued at the request of the Trustees against Mr Neffati and others. (I refer to these proceedings, and a seventh proceeding, as the Tunisian proceedings, and set out further detail about them from [36] below).
Those Tunisian proceedings comprise legal proceedings in respect of six real properties located in Tunisia in which the Trustees allege Mr Neffati either has, or at one time had, an interest (which six properties, together with three other properties, I refer to as the Tunisian properties, and describe them in further detail below from [28]), and proceedings seeking assistance from the Tunisian Courts of First Instance pursuant to a letter of request issued by Judge Street of this Court on 23 November 2016 (I refer to the letter of request below at [34]-[35]).
Mr Neffati submits, and I accept, that each of these reasons constitutes a legitimate purpose to travel to Tunisia.
The Trustees say that until Mr Neffati has fully co-operated with them by answering all outstanding questions they wish to ask – not only about the Tunisian properties, but about all aspects of his financial affairs, and by providing all outstanding books and records – he is a poor candidate for the favourable exercise of the Court’s discretionary power under s.90‑15 of the Insolvency Practice Schedule (Bankruptcy) in Schedule 2 to the Insolvency Law Reform Act 2016 (Cth) to make such orders as it thinks fit regarding Mr Neffati’s application, being a question arising in the administration of his estate.
Relevant Principles and legislative framework
The application in this Court is framed under ss.30, 33 and 272 of the Act, ss.5-5, 5‑15, 5-20, 5-30, 90-15 and 90-20 of the Insolvency Practice Schedule, r.90.80 of the Insolvency Practice Rules (Bankruptcy) 2016, and the Federal Circuit Court (Bankruptcy) Rules 2016, the Federal Circuit Court Rules 2001, and to the extent applicable, the Federal Court Rules 2011 (together the Rules).
Section 272 of the Act provides, relevantly:
(1)A person who:
…
(c) after he or she has become a bankrupt and before he or she is discharged from the bankruptcy, without the consent in writing of the trustee of his or her estate, leaves Australia, or does an act preparatory to leaving Australia;
commits an offence and is punishable, on conviction, if the offence relates to the doing of a thing specified in paragraph (a) or (b), by imprisonment for a period not exceeding 5 years or, in any other case, by imprisonment for a period not exceeding 3 years.
(2) The trustee may impose written conditions on a consent given for the purposes of paragraph (1)(c). If the bankrupt is liable to make a contribution to the trustee under section 139P or 139Q, the conditions may include conditions regarding the payment of that contribution.
(3) If the bankrupt contravenes any condition imposed by the trustee, the bankrupt commits an offence and is punishable, on conviction, by imprisonment for a period not exceeding 1 year.
The Court’s discretion is provided in ss.90-15 and 90-20 of the Insolvency Practice Schedule and r.90.80 of the Insolvency Practice Rules. Section 90-15(1) of the Insolvency Practice Schedule provides:
(1) The Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate.
Without limitation, those orders may include an order determining any question arising in the administration of the estate: s.90‑15(3)(a). There is no dispute that Mr Neffati is a regulated debtor, that the Trustees are trustees of his estate, and that the question of permitting Mr Neffati to travel, and any conditions attaching to his travel, are matters falling within s.90-15.
Pursuant to sub-s.90‑15(2)(b) the Court may exercise the power under sub-s.90-15(1), inter alia, on application under s.90-20. Under sub‑s.90‑20(1)(a), a person with a financial interest in the administration of the regulated debtor’s estate may apply for an order under s.90‑15. Mr Neffati is such a person.
There is no dispute that the Court has power pursuant to the above to grant the orders sought, including on conditions. There is also no dispute that the application to this Court was made within the 60-day period prescribed by s.90-80 of the Insolvency Practice Rules.
The Court’s discretion
Prior to repeal on 1 September 2017, the power of review in the Court was contained in s.178 of the Act. The Court’s power of review is now contained in s.90-15 of the Insolvency Practice Schedule, which I have referred to above. Section 178(1) of the Act provided, relevantly, that a bankrupt affected by an act, omission or decision of the trustee may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable. Notwithstanding the repeal of s.178 as part of the changes brought by the Insolvency Law Reform Act, both parties submitted, and I accept, that the legal principles upon which the Court acts in relation to the review have not relevantly changed, and that the principles applied in cases decided under s.178 remain relevant to the exercise of the Court’s power under s.90-15 of the Insolvency Practice Schedule.
The Trustees accept that the power to refuse permission to travel is not to be exercised so as to punish a bankrupt, nor is it to be used to deny to a bankrupt the rights and freedoms of other citizens, including the right to travel overseas. The power granted to the Trustees is to be exercised for purposes connected with the administration of the estate.
On an application of this nature it is necessary for the Court, in exercising its discretion whether to interfere with the Trustees’ decision (or their failure to decide), to determine whether:
(i)the proposed travel is for a genuine and legitimate reason;
(ii) the bankrupt is likely to return to Australia as promised;
(iii) the proposed travel will hamper the administration of the bankrupt’s estate,
noting that whilst the above considerations may lie at the forefront of the Court’s considerations, they are not exhaustive of the considerations that may be relevant to the Court’s exercise of discretion: see Re Hicks; ex Parte Lamb (1994) 217 ALR 195, per Heerey J. The criteria set out in Re Hicks have been relied upon in a number of decisions in this Court to which counsel referred, see the decision of Judge Riethmuller in Dunwoody v Official Receiver [2005] FMCA 1634 at [20] – [21]; Gu v Pascoe [2006] FMCA 367; Khan v Melluish [2010] FMCA 119.
In Tinkler v Melluish [2017] FCA 52; 14 ABC (NS) 508, at [18]-[22], Nicholas J discussed many of the principal Federal Court of Australia authorities, including the decisions of French J in Macchia v Nilant (2001) 110 FCR 101, Deane J in Re Tyndall; Ex Parte Official Receiver (1997) 17 ALR 182, Heerey J in Re Hicks, and Bowen CJ in Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40. See also the decision of Beach J in Miao v Michell [2015] FCA 22, and Besanko J in Moore v Macks [2007] FCA 10 at [28]. From the abovementioned cases the following principles may be discerned:
(a)the purpose of the section is to give the Court a supervisory role with respect to a trustee in bankruptcy in the administration of the bankrupt’s estate (Moore);
(b)grounds for judicial review must be established by an applicant, and the exercise of the Court’s power is wholly in its discretion (Moore);
(c)it is not necessary for the applicant for relief to show that a trustee’s decision was incorrect. The Court may make an order even if the trustee’s decision was “quite correct and reasonable” on the material then available to the trustee (Macchia; Tinkler). At the same time, the trustee’s opinion will be a relevant factor in the exercise of the Court’s discretion, and the mere fact that the Court might have taken a different course is not a basis to disturb the decision (Re Tyndall);
(d)the Court is able to take into account information which was not available to the trustee at the time of an impugned act, omission or decision (Moore);
(e)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 (Tinkler);
(f)such applications must always be treated as being of fundamental importance, requiring careful consideration of all relevant circumstances (Re Tyndall);
(g)restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at ensuring the proper administration of the bankruptcy laws and 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. 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 (Re Tyndall; Weiss);
(h)it is a basic principle that a resident of Australia is entitled to expect that they 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 (Weiss at 43);
(i)one consideration that may be of significance in some cases is the extent to which the bankrupt has complied with their obligations under the Act. As Nicholas J identified in Tinkler at [22]:
In some cases it may also be relevant to consider whether the bankrupt has been candid in relation to the bankrupt’s proposed travel, including, for example, the funding arrangements pertaining to such travel;
(j)in some cases the possibility that the bankrupt has committed offences under the Act and is seeking to abscond from possible prosecution will be extremely relevant (Re Tyndall);
(k)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. However, denial of permission to travel where a bankrupt is in default of their other obligations may be an appropriate method by which a trustee can encourage compliance by the bankrupt (Dunwoody at [29]).
Mr Neffati accepts that all “property” (s.5 of the Act), which is “divisible property” (s.116(2) of the Act), vests in the trustee upon the date of bankruptcy, relating back to the date of commencement of the bankruptcy (s.5 and s.115 of the Act). In the case of real estate located outside the Commonwealth of Australia however, and, in particular, real estate located in a “civil law jurisdiction” there is no vesting unless and until the bankruptcy is recognised relevantly in that jurisdiction: Re Doyle; Ex parte Brien v Doyle (1993) 41 FCR 40. Further, where “property” is held on trust, such “property” is not property divisible amongst the creditors in the bankruptcy: s.116(2)(a) of the Act.
Tunisia is a civil law jurisdiction. There is a dispute between the parties whether certain of the Tunisian properties are held in trust, and, indeed, whether family trusts or the holding of realty under family trust arrangements exist and are recognised under Tunisian law. These are matters that may be in issue in the Tunisian proceedings. It is beyond the scope of this application to determine these issues.
Factual matters
Mr Neffati is an Australian citizen. He has a valid Tunisian passport. He resides permanently in Sydney together with his current wife, and their three infant children (each of whom is under four years old). They live in rental accommodation. He has older children from previous marriages, at least some of whom also live in Australia. Mr Neffati also has adult children and grandchildren who live in Tunisia, as do at least two of his three ex‑wives.
Currently Mr Neffati is a taxi driver with earnings of $52,000 gross before payment of the fees for using the taxi and before expenses and tax. As at 26 February 2018, the date of his affidavit, he was not paying any income contribution to his Trustees as the amount he was earning is less than the prescribed amount.
On 23 October 2015, the Trustees replaced Mr Neffati’s original trustee in bankruptcy, Mr Geoffrey McDonald, and became joint trustees of the bankrupt estate. During 2016, Mr Neffati appealed the Trustees’ decision to object to discharge of his bankruptcy, which appeal was rejected by the Administrative Appeals Tribunal on 19 July 2017.
In opposing the present application to travel, the Trustees submit that there are substantial creditors in the estate. In his statement of affairs made in February 2013 immediately prior to becoming a bankrupt Mr Neffati disclosed creditors in excess of $1.245 million (after the Trustees’ rejection of a number of proofs of debt), excluding a creditor with a debt of $1.49 million who was subsequently admitted in August 2015. The statement of affairs disclosed negligible realisable assets.
The Tunisian properties
The Trustees have conducted, as had Mr McDonald, investigations into the property of the bankrupt available for distribution. The Trustees identify nine real properties located in Tunisia (the Tunisian properties: see [9] above) in which they say Mr Neffati may have, or previously had, an interest, eight of which are now held in the name of family members or companies or persons with whom the Trustees believe Mr Neffati to have some connection. The Trustees say that the nature of Mr Neffati’s interests in those Tunisian properties, and the possibility of recovery of any of those properties by the Trustees, are the central issue in the administration. The Trustees say that, at least at present, those properties constitute the only source from which any dividend to creditors might be paid.
Only one of the Tunisian properties is in Mr Neffati’s name. He says that he holds that property as trustee of a family trust.
Mr Neffati says five of the properties were purchased by him in his capacity as trustee for his children from former marriages and were transferred or sold to the company Société Neffati Agricole (SNA) in June 2013. Mr Neffati says that SNA replaced him as trustee of his family trust. Three of those properties appear to have been onsold.
A further property is held in the name of “Tunibar Company”. Finally, Mr Neffati said under cross-examination before me that two properties that are identified by the Trustees in a schedule prepared by them as “The Olive Farm” and “The Villas” are his father’s properties and comprise one property.
The Trustees say they have reason to believe that Mr Neffati has been less than honest in his disclosures to the Trustees about his entitlements to, and the transfer of, the Tunisian properties.
Court orders and Court requests previously made in relation to the Tunisian properties
On 8 May 2015, Mr McDonald, obtained an injunction ex parte from Judge Street of this Court preventing Mr Neffati from dealing with certain of the Tunisian properties (it appears potentially six properties) and an order that he provide confidential disclosure of his assets in Tunisia. His Honour was satisfied, on the evidence before the Court, ex parte, that the then trustee had established a prima facie case of a deliberate concealment by Mr Neffati and a well-founded fear of a real risk that the properties would be dissipated unless the injunction was granted. The injunction was subsequently continued until 6 August 2015. Subsequent orders of the Court disclose that the parties entered into a deed settling the proceeding on a without admissions basis.
On 4 November 2015, the Trustees applied to the Court for an order to issue a letter of request under s.29 of the Act to the Courts of Tunisia requesting assistance in relation to Mr Neffati’s assets in Tunisia. On 18 December 2015, Judge Street made an order authorising the issue of a letter of request.
On 23 November 2016, following a further request by the Trustees and upon their confirmation that there had been no appeal, Judge Street, varying order 1 made 18 December 2015, issued an amended letter of request, addressed to the Justices of the First Instance Court of Tunisia and requesting the Court, inter alia, to assist in vesting in the Trustees the nine Tunisian properties, and any other assets and income from such assets of Mr Neffati. Mr Neffati, through his then lawyers, informed the Court that he did not oppose the issue of the amended letter of request.
Current legal proceedings brought by the Trustees in Tunisia
On 8 March 2018, by way of summons, the Trustees commenced seven sets of legal proceedings in Tunisia in the Court of First Instance, relating to at least six of the Tunisian properties (the Tunisian proceedings: see [8] above). Mr Neffati is named as a party in six of the Tunisian proceedings. Each of those six summons was listed for a first hearing date on 12 April 2018. They were then stood over to a next Court date of 6 June 2018. In the Tunisian proceedings (or at least the six in which he is named a party) Mr Neffati has local legal representation, being lawyers in Tunis who act for Mr Neffati and his father in Tunisia.
Since at least 16 March 2018, Mr Neffati’s Australian lawyers in this proceeding have requested English translations of the summons. On 3 May 2018 the Trustees provided Mr Neffati’s lawyers with English translations of five of the summons. An English translation of a sixth summons was provided in Court on 9 May 2018. The evidence does not disclose the subject matter of, or parties to, the seventh set of proceedings.
Previous travel, without consent
The Trustees drew my attention to an instance of a previous failure by Mr Neffati to report travel. They say, and Mr Neffati does not dispute, that early in 2013 (Mr Aravanis, joint Trustee, says from 14 to 26 February 2013) he travelled overseas to Tunisia, while bankrupt. Shortly before he was made bankrupt (in February 2013), however, Mr Neffati informed Mr McDonald, then his controlling trustee, that he wanted to travel to Tunisia to deal with urgent family matters. The evidence is that Mr McDonald informed Mr Neffati at that time: “that [I have] no ability to stop you travelling and that I thought the reason was fair”. Mr McDonald assumed that Mr Neffati thereafter mistakenly assumed that the position remained the same when he became bankrupt. The transgression appears to have been reported, and investigated by AFSA. The Trustees do not point to any subsequent travel by Mr Neffati, with or without consent.
The Trustees say that in 2013, after his 2013 trip to Tunisia, Mr Neffati or parties associated with him transferred five of the Tunisian properties out of his name to SNA. As I have set out at [30] above, Mr Neffati explains that SNA replaced him as trustee of his family trust.
Applicant’s travel proposal
Mr Neffati says that if his request for travel is approved:
(a)he proposes to stay at his father’s residence with his father and siblings;
(b)the cost of his flights will be paid for by a friend, a Ms Giselle Kabro, who provides a confirmatory letter;
(c)Mr Raouf Neffati, his eldest son, who lives in Tunisia, will meet Mr Neffati’s expenses in Tunis including his meals, transport and any financial cost for him, and proposes that Mr Neffati stay with him and his family. Mr Raouf Neffati provides a confirmatory letter.
Mr Neffati proposes to travel to Tunisia with his wife and three infant children, and to stay for six weeks (which period was to encompass the Court date of 6 June 2018), or such longer period if required in order to instruct his lawyers in the Tunisian proceedings. Initially, in his request for travel, and before the Tunisian proceedings were commenced, Mr Neffati proposed to be overseas for a month (see above at [3]).
Mr Neffati’s reasons for travel
Mr Neffati’s father is currently 85 years old and is a widower who lives in Kondar, Tunisia. The translation of the medical report (see [6] above) reveals that he is a smoker, diabetic, suffers chronic renal deficiency, and cardiac failure with cataracts and complications, but that he was nonetheless autonomous before his stroke in August 2017. The medical report states that as at the date of the report, Mr Neffati senior’s health was very precarious, he was dying and that the presence of his only son “can only be the best moral support he needs”. In his affidavit in support of his application Mr Neffati states his wish to visit his father before his father dies.
Mr Neffati obtained an updated medical report issued on 1 May 2018 concerning his father’s health. This updated report reveals that Mr Neffati’s father has shown an improvement of his condition, including his diabetes stabilising, and that he is now “being independent following a prolonged physiotherapy treatment”.
Mr Neffati’s stated additional reason to travel is to instruct his local lawyers in his defence in the Tunisian proceedings. My Neffati submits that it is reasonable that he attend in person to instruct in relation to the claims made. The summons make serious allegations. The various summons assert that “based on the evidence [Mr Neffati] has hidden assets in Tunisia”, that “It is evident that a number of the First Party’s [Mr Neffati’s] assets such as land and properties have been disposed off fraudulently by [him] since the 14/02/2013 despite his understanding that the Australian authorities has already declared him bankrupt and the Australian Courts has ordered [him] not to transfer, sell or dispose of any assets”, and, in two of the summons, that the named third party transferee “accepted the agreement as a temporary sales/transfer and hold on into the property knowing that is an illegitimate unacceptable under the Tunisian Law …”.
The Trustees’ reasons for opposing the travel request
The Trustees’ opposition to Mr Neffati’s travel is put on numerous bases which can be summarised as:
(a)a concern, given Mr Neffati’s circumstances, that Mr Neffati will not return to Australia;
(b)concerns relating to the Tunisian properties and the Tunisian proceedings arising from Mr Neffati’s past concealment and less than full and frank disclosure, that he may attempt to deal in the properties or in proceeds of sale from them whilst in Tunisia in light of past dealings in the properties, and that the Trustees need information to prosecute the Tunisian proceedings which Mr Neffati has not provided, and has not said he would provide;
(c)Mr Neffati’s inadequate compliance / non-compliance with obligations to provide and update information as to income, employment, residential address, expenses and provision of documents; and
(d) that he failed to properly disclose matters in his statement of affairs in 2013.
In correspondence, the Trustees also sought information about an apparent indebtedness to the Deputy Commissioner of Taxation, disclosure of the details of a power of attorney granted in 2013, and information about his travel in 2013 and extent of prior consent.
Consideration
(a) The Trustees’ concerns that Mr Neffati will not return to Australia
The Trustees are concerned that Mr Neffati will not return to Australia as he intends to travel with his wife and infant children, that he was originally from Tunisia, has a valid Tunisian passport, has no material assets in Australia, has various family members living in Tunisia and the Trustees believe that, directly or indirectly he owns (or owned) the Tunisian properties. They raise concerns that given his past non‑disclosures and past, and, they allege, continuing, breaches of his obligations which they say constitute offences, he may seek to abscond.
With leave, Mr Neffati was examined on his intentions and the Trustees’ fear that if allowed to travel, he would not return. He denied that he would not return to Australia. He said:
I am Australian citizenship of this… I’m ... live in Australia. You think I will go to Tunisia where the civil war murdered my daughter, my three children, they think I’m going to live there? I wouldn’t think so, even say that, unless to see my father and my family.
Mr Neffati made his assurances emphatically. He was not cross-examined on the above, nor more generally as to his intentions of returning to Australia.
I accept his assurances to the effect that he lives in Australia and that he and his young family will not stay in Tunisia. The evidence discloses that one of his daughters who lived in Tunisia is deceased. I am also mindful of the original reason for Mr Neffati’s request to travel – his father’s stroke and state of health disclosed in the medical report, and his father’s age. Given Mr Neffati’s assurances, under oath, I am not persuaded that the matters raised by the Trustees as reasons for concern that he will not return, on balance, are sufficient reasons not to favourably exercise my discretion.
(b) Concerns regarding the Tunisian properties and proceedings
The Trustees have expressed concerns about Mr Neffati’s failure to fully disclose his interests, or past interests, in the Tunisian properties, and that he will interfere in their attempts to recover the Tunisian properties, including by defending the Tunisian proceedings. They also require he provide information to assist the Trustees to prosecute the Tunisian proceedings. The correspondence shows that they have required the following:
(a)that Mr Neffati give an undertaking not to interfere with the legal proceedings being conducted in Tunisia;
(b)that Mr Neffati make himself available to answer the Trustees’ inquiries or those of their Tunisian lawyers whilst he is visiting Tunisia, attend conferences with their Tunisian lawyers to answer queries concerning transactions he has entered into and his knowledge of the dealings on properties to which he was the registered proprietor;
(c)that Mr Neffati provide further information about the transfer of the properties in Tunisia and identify Mr Neffati’s Tunisian lawyer.
By letter dated 27 March 2018, Mr Neffati’s lawyers advised, inter alia:
(a)that Mr Neffati will give an undertaking that he will not take any action which affects the legal proceedings in Tunisia, other than by using the normal legal courses of action open to him according to the laws of Tunisia or as he may be properly advised by legal advisors in Tunisia;
(b)that Mr Neffati will make himself available as directed by the Court of First Instance in Tunisia, subject to the right to have his legal representative present at all times, and without prejudice to his ability to decline to provide information where advised not to do so according to the laws of Tunisia and according to the nature of the proceedings against him by the Trustees.
The Trustees then requested that Mr Neffati be contactable on a daily basis in Tunisia, and that he provide his contact details and those of his wife and children, and how long they proposed to stay in Tunisia. They asked whether the tickets of his wife and children were non-refundable. I am not persuaded that details relating to Mr Neffati’s family’s travel are relevant to the due administration of the estate.
The parties are at issue as to the information and assistance that Mr Neffati is required to provide in relation to the Tunisian proceedings. The Trustees assert in their lawyer’s letter dated 4 April 2018 that Mr Neffati has no claim to the properties sought in the Tunisian proceedings, and so his interest in the proceedings is very limited. They say that “The documentation and the information sought are clearly matters referable to the examinable affairs of your client and his bankrupt estate.”
Neither party gave any detailed or coherent evidence regarding the Tunisian proceedings. The Trustees appear not to have had translations of the summons available until shortly before they provided them to Mr Neffati’s Australian lawyers, who in turn appear to have been reliant on information provided by the Trustees.
If, as the Trustees say, Mr Neffati’s interest in the Tunisian proceedings is very limited, and if, as they say, Mr Neffati has no claim to the Tunisian properties, then the Trustees’ concerns should be allayed by the undertaking and offer conveyed by Mr Neffati’s lawyers in their letter of 27 March 2018. The Trustees know the identity of Mr Neffati’s Tunisian lawyers.
Mr Neffati, through his Australian lawyers, denies he intends to improperly interfere in the Tunisian proceedings. Mr Neffati is named as a party, and allegations are made in the summons that are in evidence that he has, or has had, interests in the Tunisian properties. In these circumstances, he should not be denied the ability to defend himself in the proceedings, and I consider it reasonable that he attend in person to instruct his Tunisian lawyers, subject to giving the undertaking and assurances set out at [52] above.
(c) Inadequate compliance / non-compliance with obligations to provide and update information as to income, employment, expenses and provision of documents
Further to the request to travel, the Trustees requested information from Mr Neffati concerning his income, how he receives his income, how he maintains his household, funding of travel and legal expenses, and where his salary and income from his business are deposited, and why he has not been able to provide supporting documents for the years ended 30 June 2016 and 2017. There is no evidence to suggest that the Trustees requested this information before receipt of the request to travel, save for a request for information about his income that was sent to the wrong address.
Some of the requested information was provided in recent inter‑parties correspondence. More information was obtained from Mr Neffati under cross‑examination, in particular how Mr Neffati currently earns income as a taxi driver, what payment records he now receives, and what records he received in the past when employed as a tiler. I am satisfied that the questions asked by the Trustees regarding Mr Neffati’s receipt of income and payment of household expenses, that they say they required answered in order to consider the request for travel, have been sufficiently answered.
To the extent that there are documents relevantly relating to his income and tax returns in existence that have not been provided to the Trustees in relation to the 2016 and 2017 years, the evidence is that Mr Neffati’s accountant should have the documents. Mr Nefatti’s lawyers have requested the accountant to provide the documents and have stated that on receipt they will provide the documents to the Trustees.
Mr Neffati’s lawyers requested that the Trustees provide copies of income contribution assessments, questionnaires and income tax returns relating to Mr Neffati as a regulated debtor. When cross‑examined, the joint Trustee, Mr Aravanis, was not able to satisfactorily explain their non-production, save for explaining that a questionnaire was sent to the wrong address. It is apparent from the correspondence in evidence, and Mr Aravanis’ evidence, that the Trustees have not proceeded speedily in the administration of the estate either before or since the Administrative Appeals Tribunal rejected Mr Neffati’s appeal against the extension of the bankruptcy.
Although enquiries prompted by the request to travel and by Mr Neffati’s current circumstances as attested to in his affidavit have revealed that Mr Neffati has not been pro-active in communicating to his Trustees the facts of, or details about, changes in his circumstances, I am satisfied that the Trustees are now informed of Mr Neffati’s current residential address, domestic circumstances and employment.
Whilst I remain concerned about Mr Neffati’s past omissions in relation to the provision of income and employment information and his failure to notify these changes, Mr Neffati has now answered the substance of the Trustees’ questions on these matters to the Court’s satisfaction. If there is any documentation outstanding that the accountant holds, it should be provided. I am not persuaded that Mr Neffati’s omissions in this regard are reason not to now afford him the favourable exercise of my discretion.
(d) Mr Neffati’s failure to properly disclose matters in his 2013 statement of affairs
Mr Neffati did not make complete disclosure in his 2013 statement of affairs. He named as debtors, persons whose proof of debts have been rejected by the Trustees. He did not disclose a substantial debtor, whose proof of debt was subsequently accepted on application to a judge of this Court. He did not disclose any of the Tunisian properties, or any interest in any of the Tunisian properties, several (at least) of which were then held in his name, although he says on trust. As I have observed above at [23], there is clearly a dispute about what rights to, or interests in, those properties, if any, Mr Neffati has or may have had at any relevant time.
The evidence before this Court reveals that the Trustees, and the former Trustee, Mr McDonald, have known of at least six of the Tunisian properties since at least May 2015 when the Court, on the application of Mr McDonald, injuncted Mr Neffati from dealing in those properties, and ordered that he make confidential disclosure. However, the evidence does not disclose that the Trustees sought to examine Mr Neffati about those failures prior to this proceeding. Further, their actions indicate that they had sufficient information and evidence to obtain a letter of request from this Court in November 2015, an amended request (correcting the name of the addressee) in December 2016, and now to commence the Tunisian proceedings.
I am not persuaded that the consequence of Mr Neffati’s 2013 failures to give proper disclosure in the statement of affairs should be that, in 2018, he be denied consent to travel to visit his father and to instruct lawyers.
Indebtedness to the Deputy Commissioner of Taxation
Among the conditions canvassed by the Trustees in correspondence was whether Mr Neffati should pay his outstanding taxation liabilities. As at March 2018, Mr Neffati had a taxation liability in the order of $10,874.00. He is paying the Australian Taxation Office in instalments of $100 per month. He has stated that he will pay instalments to the Australian Taxation Office in advance for the period he is away. If I am to exercise my discretion to allow Mr Neffati to travel for any period, I am inclined to impose as a pre‑condition for travel that a greater amount of his outstanding taxation liabilities than the $150 to $200 proposed be paid before he travels. I will hear the parties as to whether as a condition of travel some additional payment should be made to reduce Mr Neffati’s outstanding taxation liabilities before he travels, and if so, what amount the parties submit is appropriate.
Other matters raised by the Trustees
Following upon receiving the request to travel, and then subsequent to the commencement of this proceeding, the Trustees have sought information about several other matters. The tenor of the correspondence is that unless and until Mr Neffati provide answers they consider adequate, the Trustees will maintain their objection to travel. Some of the matters raised do not, on their face, have any connection with the request for travel, and could have been asked at any time prior to October 2017 in the course of the due administration of the estate.
The Trustees asked questions when it appears they knew the answers, such as whether Mr Neffati travelled in 2013, and whether he had Mr McDonald’s prior consent. Given their knowledge, it is unclear why such questions were required to be answered before Mr Neffati can travel.
Similarly, questions asked by the Trustees about a power of attorney Mr Neffati gave in 2013 could have been asked before the request for travel. In the event, questions regarding the power of attorney were answered in correspondence, and expanded upon in answers given in cross-examination.
I am not persuaded that incidents of Mr Neffati’s 2013 travel or issues relating to the power of attorney are such that Mr Neffati’s request to travel should be denied.
As to Mr Neffati’s failures to provide prompt details of changes of address, and employment, there is no evidence to suggest that the Trustees have been hampered in the due administration of the estate by any such failures to inform. Any failures to inform have been remedied. In addition, Mr Neffati is on express notice that he must promptly inform his Trustees of future changes in his residential address and his employment.
The Trustees have not provided the Court with any satisfactory explanation why they did not, during 2017, request that Mr Neffati provide information or other assistance relating to the Tunisian proceedings. The Trustees did not avail themselves of the procedures under s.81 of the Act to request the Court to summon Mr Neffati for examination, and so ensure that such examination was under the control of the Court. The Trustees’ requirement that Mr Neffati agree to attend on, and be available to answer questions of the Trustees’ Tunisian lawyers, as a pre-condition to the Trustees’ consideration of his travel request is difficult to reconcile with their earlier non-action, as is their non-acceptance of the offer in [52] above.
The requirements of due administration of the bankrupt’s estate in the present case do not require Mr Neffati to be examined by his Trustees or to answer questions informally prior to travelling, or that he not be allowed to travel.
In relation to the Trustees’ request that Mr Neffati attend on their Tunisian lawyers whilst in Tunisia, I am satisfied, on the evidence, that the terms offered by Mr Neffati’s lawyers in their letter dated 27 March 2018 (see above at [52]) are sufficient conditions to place on his travel regarding assistance in the due administration of his estate. The date, time and place of, and attendees at, one such conference, should be set prior to Mr Neffati departing from Australia. I will hear the parties on the mechanisms to be put in place to settle such details.
Conclusion
I have considered the objections raised by the Trustees and the extent of Mr Neffati’s responses and disclosure. I conclude that:
(i)Mr Neffati’s proposed travel is for a genuine and legitimate reason, namely to visit his father and to instruct his Tunisian lawyers in his defence in the Tunisian proceedings;
(ii)Mr Neffati is likely to return to Australia as promised; and
(iii)provided that Mr Neffati attends the conference with the Trustees’ Tunisian lawyers and acts in that conference within the bounds of his legal advice as foreshadowed by his Australian lawyers, the proposed travel is unlikely to hamper the administration of the estate.
I propose to grant Mr Neffati’s application on the conditions I outline below. I have concluded that these conditions balance the Trustees’ concerns for the due administration of the estate and the bankrupt’s obligations with respect to that administration and Mr Neffati’s legitimate reasons for travel.
Mr Neffati has provided information about the funding arrangements to be put in place in relation to the payment of his airline ticket, his expenses whilst overseas, and his accommodation. I am satisfied as to the funding arrangements, but require that he provide clarification as to the proposed accommodation. I also consider that it is reasonable that Mr Neffati be readily contactable whilst in Tunisia, and for that purpose, that he provide to his Trustees his contact details and contact details of the persons with whom he will be staying whilst in Tunisia.
In outline, the following are the conditions upon which I will grant Mr Neffati’s application to travel:
(1) confirmation from Ms Giselle Kabro, on oath, that she will pay for Mr Neffati’s return airline tickets and flight incidentals;
(2)that the ticket purchased be a non-refundable return air ticket for travel to Tunisia and return for a period of up to 6 weeks;
(3)that the dates of or period within which Mr Neffati will travel to Tunisia and return to Australia are specified, and that such travel is to be concluded no later than 3 months hence, in default of such other period as the parties agree;
(4)Mr Neffati provide to his Trustees details of where and with whom he will be staying whilst in Tunisia, including contact details of the persons with whom he will be staying, and the address and readily identifiable location of that or those places, such details to be provided no later than 14 days prior to his date of departure from Australia;
(5)Mr Neffati provide to his Trustees telephone, email, physical address and any other contact details necessary to ensure that he is readily contactable whilst in Tunisia, such details to be provided no later than 14 days prior to his date of departure from Australia;
(6)Mr Neffati attend one conference with the Trustees’ Tunisian lawyers whilst he is in Tunisia, the details of the date, time and place of, and attendees at, such conference to be agreed no later than 14 days prior to his date of departure from Australia, and such conference to be on the terms as proposed by his Australian lawyers in their letter of 27 March 2018 (as set out at [52] above);
(7)Mr Neffati give an undertaking to the Court in terms of paragraph 1 of the letter of 27 March 2018 (see above at [52]);
(8)Mr Neffati pay an amount in reduction of his outstanding liability to the Deputy Commissioner of Taxation no later than 14 days prior to the date of his departure from Australia, such amount being either agreed between the parties, or in the absence of agreement, as I shall order after receiving the parties’ submissions as to the appropriateness of the amount.
In the event, the only order I will make today is that that the parties are to provide to my Chambers proposed short minutes of order reflecting these reasons within 14 days, or by such other date as I fix after hearing from the parties at the time of delivering these reasons.
I certify that the preceding eighty (80) paragraphs are a true copy of the reasons for judgment of Judge Baird
Associate:
Date: 20 July 2018
0
8
4