Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni

Principles 5 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? 6 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]. 7 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.

Genuineness of intention 8 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. 9 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. 10 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 11 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. 12 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. 13 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. 14 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. 15 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. 16 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. 17 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. 18 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 19 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. 20 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: 34.1 The chance that the Applicant will abscond and not be available to answer questions or provide information as the investigations develop; 34.2 The 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 34.3 The probability that [the trustee] will publicly examine the Applicant once further information has been obtained. 21 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. 22 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. 23 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. 24 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. 25 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. 26 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. 27 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. 28 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. 29 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)". 30 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. 31 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. 32 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. 33 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.