In Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni (no 2)  the Federal Court of Australia considered a bankrupt’s application for review of the Bankruptcy Trustee’s decision not to allow him to leave Australia and live in the UK. Although there were doubts about the bankrupt’s assistance to date with the Trustee’s investigations, this decision explored other factors and highlights that the power to refuse travel to a bankrupt is not punitive.
In 2006, Maruti Holdings Pty Limited (Maruti) paid US$21 million to a company in the British Virgin Islands, Sinclair Strategies Ltd (Sinclair).
Mr Moltoni became a director of Sinclair in 2013.
In September 2017, the Australian Taxation Office (ATO) issued an amended assessment to Mr Moltoni, on the basis that the US$21 million payment to Sinclair was in effect, made in return for Mr Moltoni’s consultancy services provided to Maruti and was treated by ATO as Mr Moltoni’s income.
In November 2017, after Mr Moltoni had returned to Australia for his daughter’s wedding, ATO issued a Departure Prohibition Order preventing him from leaving Australia.That order remained in force.The ATO subsequently authorised Mr Moltoni to return to the UK provided he return by March 2018.
Mr Moltoni returned to Australia in March 2018 and, as a result of the ATO’s amended assessment, declared himself bankrupt in October 2018. ATO represents over 99% of the value of creditors in the bankruptcy.
Mr Moltoni wished to return to the UK to live with his wife. In February 2020, the Trustee did not permit Mr Moltoni to leave Australia and reside in the UK because he thought:
The Trustee considered Mr Moltoni should remain in Australia for at least another 6 months whilst investigations continued and before the Trustee would be in a position to complete any examination.
As a result, Mr Moltoni applied to the Court to review the Trustee’s decision.
In considering Mr Moltoni’s application, the following questions needed to be answered:
There was no dispute between the parties about the relevant principles to consider, including:
Genuineness of travel
His Honour held that Mr Moltoni’s intention was genuine on the basis that:
Likelihood of return to Australia
His Honour took into account the Trustee’s submission that Mr Moltoni was not forthcoming in relation to his obligations under the Act.
Mr Moltoni submitted that:
The Court accepted Mr Moltoni’s submission and held that it was likely that Mr Moltoni would return to Australia when required. However, Mr Moltoni and his wife needed to provide undertakings, including providing a mortgage over his wife’s property in Australia guaranteeing approximately $500,000.
Mr Moltoni’s compliance & whether administration would be hampered
The Trustee submitted that Mr Moltoni would hamper the administration of his estate because, amongst other things, he was evasive in assisting the Trustee to obtain records relating to his overseas companies.
After examining the evidence, the Court recognised there were many issues surrounding Mr Moltoni’s financial dealings which the Trustee had to continue investigating and expressed doubts that Mr Moltoni had effectively complied with all of his obligations. The Court was not particularly convinced about Mr Moltoni’s denial of any knowledge or involvement in matters being investigated.
Despite some doubts as to whether Mr Moltoni had fully assisted the Trustee’s investigations so far, the Court considered that it was unreasonable to stop Mr Moltoni from travelling to the UK and residing there provided that he would be subject to all of the necessary undertakings and restrictions.
The Court has broad discretion to consider whether it is in the interest of justice and equity to refuse permission to a bankrupt to travel overseas.
This is a reminder that the underlying principles for preventing a bankrupt from travelling overseas are based on the need to assist the effective administration of the estate, rather than being punitive in nature.
Additionally, it appears that Court is willing to accept that the digital world may facilitate investigations without the need for a bankrupt to remain in the country.
Barbara-Ann Sim, Partner
Petar Damnjanovic, Lawyer
  FCA 792.
 Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40, 43.
 Re Tyndall; Ex Parte Official Receiver (1977) 30 FLR 6, 15.
 Ibid, .
 Ibid, 10.
 Groves (Bankrupt) v Robinson (Trustee)  FCA 490; (2013) 11 ABC(NS) 467 .