FEDERAL COURT OF AUSTRALIA

O’Kearney (Trustee), in the matter of Anthony (Bankrupt) v Property & Entertainment Corporation Pty Ltd [2019] FCA 1266

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to rules 20.14, 20.16 and 20.17 of the Federal Court Rules 2011 (Cth) (the Rules), the parties are to provide standard discovery by list of documents by 4.00 pm on 16 August 2019.

2.    Discovery may be given by any electronic means.

3.    The freezing orders attached to these orders be made and continue until further order of the Court.

4.    Liberty to apply on 3 days’ notice.

PENAL NOTICE

TO:    Property & Entertainment Corporation Pty Ltd (ACN 087 099 081), the first respondent, and Julie Veronica Zammit, the second respondent

This is a ‘freezing order’ made against you on 2 August 2019 by Derrington J after the Court was given the undertakings set out in Schedule A to this order and after the Court read the affidavits listed in Schedule B to this order.

INTRODUCTION

1.    Subject to the next paragraph, this order has effect until further order of the Court.

2.    Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified.

3.    In this order:

(a)    ‘applicant’, if there is more than one applicant, includes all the applicants;

(b)    ‘you’, where there is more than one of you, includes all of you and includes you if you are a corporation;

(c)    ‘third party’ means a person other than you and the applicant; and

(d)    ‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances.

4.    If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.

5.    If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.

FREEZING OF ASSETS

6.    The first respondent must not remove from Australia or in any way dispose of, deal with or diminish the value of any of its assets in Australia (‘PEC Australian Assets’) up to the unencumbered value of AUD$547,822 (‘the PEC Relevant Amount’).

7.    The second respondent must not remove from Australia or in any way dispose of, deal with or diminish the value of any of her assets in Australia (‘Zammit Australian Assets’) up to the unencumbered value of AUD$1,153,306.68 (‘the Zammit Relevant Amount’).

8.    If the unencumbered value of the PEC or Zammit Australian Assets exceeds the PEC or Zammit Relevant Amount in each respect, they may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of their respective Australian Assets still exceeds the PEC or Zammit Relevant Amount respectively.

9.    If the unencumbered value of the PEC or Zammit Australian Assets is less than the PEC or Zammit Relevant Amount respectively and the first or second respondent has assets outside Australia (‘ex-Australian assets’):

(a)    they must not dispose of, deal with or diminish the value of any of the Australian assets and ex-Australian assets up to the unencumbered value of the PEC or Zammit Relevant Amount respectively; and

(b)    they may dispose of, deal with or diminish the value of any of their ex-Australian Assets, so long as the unencumbered value of their Australian Assets and ex-Australian assets still exceeds the PEC or Zammit Relevant Amount respectively.

10.    For the purposes of this order:

   (1)     your assets include but are not limited to:

(a)    all of the assets of the first or second respondent, whether or not they are in their name and whether they are solely or co-owned;

(b)    any asset which the first or second respondent has the power, directly or indirectly, to dispose of or deal with as if it were their own (they are to be regarded as having such power if a third party holds or controls the asset in accordance with their direct or indirect instructions); and

(c)    the following assets in particular:

(i)    the property known as 702/85 Macleay Street, Potts Point, New South Wales more accurately described as Lot 15 in Strata Plan 10578 or, if it has been sold, the net proceeds of the sale;

(ii)    the assets of the business of the first respondent carried on at 702/85 Macleay Street, Potts Point or anywhere else in Australia or, if any or all of the assets have been sold, the net proceeds of the sale; and

(iii)    any shares or interests in other companies owned by the first or second respondent;

(iv)    any money in accounts in the name of the first or second respondent at any bank or financial institution, including the Westpac Bank accounts ending in the numbers:

  1)    413;

  2)    682;

  3)    985; and

  4)    499;

    (2)     the value of the assets is the value of the interest the first or second respondent has individually in their assets.

PROVISION OF INFORMATION

11.    Subject to paragraphs 12 to 14, the first and second respondents must:

(a)    within 14 days, to the best of their ability inform the applicant in writing of all their assets in Australia and world-wide, giving their value, location and details (including any mortgages, charges, contracts of sale or other encumbrances to which they are subject) and the extent of their interest in the assets;

(b)    within 14 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.

OBJECTIONS

12.    This paragraph 12 applies to the second respondent if she wishes to object to complying with paragraph 11 on the grounds that some or all of the information required to be disclosed may tend to prove that she:

(i)    has committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    is liable to a civil penalty.

13.    This paragraph 13 applies to the first respondent and all of the persons who are able to comply with paragraph 11 on its behalf and with whom it has been able to communicate, if they wish to object to complying with paragraph 11 on the grounds that some or all of the information required to be disclosed may tend to prove that they respectively:

(i)    have committed an offence against or arising under an Australian law or a law of a foreign country; or

(ii)    are liable to a civil penalty.

14.    If either paragraph 12 or 13 applies, the first and second respondents must:

(i)    disclose so much of the information required to be disclosed to which no objection is taken; and

(ii)    prepare an affidavit containing so much of the information required to be disclosed to which objection is taken, and deliver it to the Court in a sealed envelope; and

(iii)    file and serve on each other party a separate affidavit setting out the basis of the objection.

EXCEPTIONS TO THIS ORDER

15.    This order does not prohibit the first respondent from:

(a)    paying reasonable legal expenses;

(b)    other than the orders of this Court compelling the payment into Court of the net proceeds of sale of the property located at 702/85 Macleay Street Potts Point, New South Wales more accurately described as lot 15 on strata plan 10578, dealing with or disposing of any assets in the ordinary and proper course of business, including paying business expenses bona fide and properly incurred; and

(c)    in relation to matters not falling within (a) or (b), dealing with or disposing of any assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so the applicant is given, if possible, at least two working days’ written notice of the particulars of the obligation, subject to order 17 below.

16.    This order does not prohibit the second respondent from:

(a)    paying up to $750 per week on ordinary living expenses;

(b)    paying reasonable legal expenses;

(c)    dealing with or disposing of any assets in the ordinary and proper course of business, including paying business expenses bona fide and properly incurred; and

(d)    in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so the applicant is given, if possible, at least two working days’ written notice of the particulars of the obligation.

17.    The first and second respondents along with the applicant may agree in writing that the exceptions in the preceding paragraphs are to be varied. In that case the parties must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and the first and second respondents, and the Court may order that the exceptions are varied accordingly.

18.    This order will cease to have effect if the first and second respondents:

(i)    pay sums equal to the PEC Relevant Amount and the Zammit Relevant Amount respectively into Court; or

(ii)    pay those sums into a joint trust account as agreed in writing with the Applicant; or

(iii)    provide security in that sum by a method agreed in writing between the parties to be held subject to the order of the Court.

19.    Any such payment and any such security referred to in order 18 will not provide the applicant with any priority over the respondents other creditors in the event of a respondent’s insolvency.

20.    If this order ceases to have effect pursuant to order 18, as soon as practicable notice of that fact must be filed with the Court and served on the parties.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENTS

21.    Set off by banks

This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order.

22.    Bank withdrawals by the Respondents

No bank need inquire as to the application or proposed application of any money withdrawn by the first or second respondent if the withdrawal appears to be permitted by this order.

23.    Persons outside Australia

  (a)    Except as provided in subparagraph 23(b) below, the terms of this order do not affect or concern anyone outside Australia.

  (b)    The terms of this order will affect the following persons outside Australia:

   (i)    you and your directors, officers, employees and agents (except banks and financial institutions);

   (ii)    any person (including a bank or financial institution) who:

1)    is subject to the jurisdiction of this Court; and

2)    has been given written notice of this order, or has actual knowledge of the substance of the order and of its requirements; and

3)    is able to prevent or impede acts or omissions outside Australia which constitute or assist in a disobedience of the terms of this order; and

4)    any other person (including a bank or financial institution), only to the extent that this order is declared enforceable by or is enforced by a court in a country or state that has jurisdiction over that person or over any of that person’s assets.

24.    Notices under s 260-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth)

Nothing in this order shall prevent any third party from complying with the terms of a notice issued by the Commissioner of Taxation to the third party pursuant to section 260-5 of Sch 1 to the Taxation Administration Act 1953 (Cth) in respect of any money which the third party may owe or may later owe to the first or second respondent.

25.    Assets located outside Australia

Nothing in this order shall, in respect of assets located outside Australia, prevent any third party from complying or acting in conformity with what it reasonably believes to be its bona fide and properly incurred legal obligations, whether contractual or pursuant to a court order or otherwise, under the law of the country or state in which those assets are situated or under the proper law of any contract between a third party and you, provided that in the case of any future order of a court of that country or state made on your or the third party’s application, reasonable written notice of the making of the application is given to the applicant.

SCHEDULE A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

1.    The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.

2.    As soon as practicable, the applicant will file and serve upon the respondents copies of this order.

3.    As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it.

4.    The applicant will pay the reasonable costs of anyone other than the respondents which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondents’ assets.

5.    If this order ceases to have effect the applicant will promptly take all reasonable steps to inform in writing anyone who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.

6.    The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.

7.    The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondents or the respondents’ assets.

SCHEDULE B

1.    Affidavit of Glenn Thomas O’Kearney sworn 24 May 2019.

2.    Affidavit of Daniel Peter Bycroft affirmed 5 June 2019.

3.    Affidavit of Frank Hoare sworn 5 June 2019.

4.    Affidavit of Daniel Peter Bycroft affirmed 13 June 2019.

5.    Affidavit of Julie Veronica Zammit sworn 16 July 2019.

6.    Affidavit of Daniel Peter Bycroft affirmed 18 July 2019.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    The application before the Court today is for interim orders for discovery, the freezing of the respondent’s assets and the provision of asset disclosure affidavits, although I am not sure the last form of relief is sought.

Background

2    The applicant, Mr O’Kearney, is the trustee of the bankrupt estate of Mark Anthony (Mr Anthony). The second respondent, Ms Julia Veronica Zammit (Ms Zammit) is Mr Anthony’s mother. The first respondent, Property & Entertainment Corporation Pty Ltd (PEC) is the company of which Ms Zammit is both director and shareholder.

3    Mr Anthony was made bankrupt by a sequestration order on 15 October 2018. Mr O’Kearney, who was appointed as his trustee in bankruptcy, deposes that there are a number of significant creditors making claims upon his estate. Mr O’Kearney is also of the view that Mr Anthony has been insolvent since at least 2012.

4    Mr Anthony has been a director of at least four insolvent companies and he was disqualified from managing corporations by the Australian Securities and Investments Commission on 24 July 2017. The evidence before the Court discloses that the liquidators of a number of those companies have indicated an intention to pursue Mr Anthony for insolvent trading, engaging in uncommercial transactions and unreasonable director-related transactions.

5    Although Ms Zammit is presently the director of PEC, until 22 February 2007 Mr Anthony was also its director. Mr O’Kearney has deposed that Mr Anthony appears to continue to manage PEC. That allegation obtains some support from Mr Anthony’s conduct during the previous case management hearing. He gave the appearance of conducting the litigation on behalf of PEC and his mother. Mr O’Kearney has deposed that Mr Anthony has previously conducted court proceedings on behalf of PEC long after his resignation as a director. That allegation has not been denied by any affidavit material.

6    It is apparent that Mr Anthony resides with Ms Zammit in an apartment owned by PEC and has done so since about 18 March 2016. Mr O’Kearney has also deposed that in the five years prior to Mr Anthony’s bankruptcy he transferred considerable amounts of money in lump sums for no consideration.

7    First, he has identified the transfer of the sum of $547,822.87 to PEC by two transfers and, secondly, a transfer to Ms Zammit in the sum of $1.153 million by transferring that amount to her personal Westpac account. Mr O’Kearney deposes that there may well be further transfers or voidable transactions between the bankrupt and the respondents, however, Mr Anthony has failed to comply with his statutory duties or to provide sufficient information to Mr O’Kearney.

8    The transfers referred to have been admitted and it has been acknowledged by the bankrupt, PEC and Ms Zammit that they were made for no consideration. That acknowledgement may be subject to some qualification in that Ms Zammit perceives that, or has said that, the money paid to her was by way of a loan agreement. Whilst Mr Anthony had previously said that he made the transfers because he did not have any operative bank accounts at the time the transfers were made, that allegation has been shown to be false. Thereafter, Mr Anthony changed his explanation and said the transfer had occurred so that he could direct the respondents to deal with the funds on his behalf when he did not have time or the means to do so.

9    That has not been explained, but it might support the trustee’s argument that the moneys truly belonged to Mr Anthony. Mr O’Kearney claims that the transfers are void against him as either undervalued transactions or transfers to defeat creditors pursuant to ss 120 and 121 of the Bankruptcy Act 1966 (Cth). Prima facie, there is some strength in that allegation. An alternative claim is made that Mr O’Kearney, as trustee in bankruptcy of Mr Anthony, has an equitable claim to the transfers or right to recover them as money had and received. There is no need to reach any conclusion on the strength of those claims at this stage, although the latter claim in relation to money had and received derives some support from one of Mr Anthony’s explanations.

10    For the purposes of the freezing order, Mr O’Kearney deposes that he has concerns that, if such orders are not made, there is a risk that the assets will be dissipated. He identifies a number of factors which lead him to this conclusion being:

(a)    that the respondents have not sought to contradict any of his allegations by affidavit material filed in the proceedings and can, therefore, be assumed to have no good defence;

(b)    the respondents have failed to demonstrate any entitlement to the funds which they received, and the explanations as to why the money was transferred to them have been shown to be false;

(c)    the respondents have failed to comply with their statutory obligations under s 77A of the Bankruptcy Act to respond to Mr O’Kearney’s request for information, books and records regarding their association with the bankrupt;

(d)    there is a risk that any judgment obtained by Mr O’Kearney will go unsatisfied because Mr Anthony’s conduct in the past shows a predisposition towards not fulfilling his obligations to his creditors. Mr Anthony has demonstrated a predisposition to dissipating, diverting or concealing assets;

(e)    there is a risk that Mr Anthony will have access to and utilise the funds transferred through internet banking facilities.

11    The trustee in bankruptcy also observes that if the assets are dissipated he may suffer significant prejudice and, on the other hand, no obvious prejudice will be suffered by the respondents. The money does not appear prima facie to belong to them and, in any event, they may apply to lift the freezing orders, either wholly or partially, on an application to the Court. Mr O’Kearney has also offered an undertaking as to damages.

Application for discovery

12    Turning then to the application for discovery, Mr O’Kearney seeks orders for discovery from the respondents. He seeks either an order for standard discovery, being those documents identified in r 20.14 of the Federal Court Rules 2011 (Cth) which are directly relevant to the issues raised in the action and which, after a reasonable search, the party required to give discovery is aware, and that are or have been in that party’s control. Alternatively, he seeks an order for discovery of certain specified documents.

13    Self-evidently, this proceeding will be resolved to a significant extent on the documentary evidence of the transfers, along with any other voidable transactions of which the trustee may not presently be aware. The transfers which are presently the subject of the application involve significant amounts of money and no reasonable commercial explanation has been provided by the respondents or by Mr Anthony for the transfer.

14    A trustee in bankruptcy is, of course, in a difficult position when pursuing transactions engaged in by the bankrupt. The trustee was not a party to the transaction and necessarily relies upon information obtained evidencing it. Here the transactions occurred between Mr Anthony and Ms Zammit and PEC and they were transactions to which Mr O’Kearney was not a party. Self-evidently this is a case where an order for discovery ought to be made. Whilst discovery is often not required where litigation is between the respective parties to a transaction, there is little scope for considering it to be inapplicable where the transaction has occurred in the absence of a party to the proceeding. The documents are needed for Mr O’Kearney to adequately establish his case.

15    The making of an order for discovery is discretionary. In this case the failure of Ms Zammit and PEC to comply with their obligations to provide information or documents requested by Mr O’Kearney only demonstrates the appropriateness of this order.

16    The respondents, and in particular Ms Zammit, have made some claim to privacy of their documents. They have, to date, provided some heavily redacted documents on the basis that they do not wish to disclose to the trustee in bankruptcy the personal affairs or expenditure of Ms Zammit. That, however, is not a sufficient explanation, nor a reason to refuse an order for discovery.

17    In the circumstances where the respondents have failed to comply with their obligation under the Bankruptcy Act and the respondents have not sought to answer the concerns raised about the impugned transactions, there appears to be a very good reason to require full and proper discovery in the standard form. The trustee in bankruptcy acts in a professional role, as do his legal advisers. They are subject to the usual undertaking not to use documents other than for the purposes of the litigation and there is no reason to think that any information disclosed in discovery would be misused. It follows that an order for discovery in the standard form ought to be made.

Freezing orders

18    Mr O’Kearney further seeks freezing orders pursuant to Ch 2, Pt 7, Div 74 of the Federal Court Rules. In particular, Mr O’Kearney relies upon the following:

7.32    Freezing order

(1)    The Court may make an order (a freezing order), with or without notice to a respondent, for the purpose of preventing the frustration or inhibition of the Court’s process by seeking to meet a danger that a judgment or prospective judgment of the Court will be wholly or partly unsatisfied.

…

7.35    Order against judgment debtor or prospective judgment debtor or third party

…

(4)    The Court may make a freezing order or an ancillary order or both against a judgment debtor or prospective judgment debtor if the Court is satisfied, having regard to all the circumstances, that there is a danger that a judgment or prospective judgment will be wholly or partly unsatisfied because any of the following might occur:

(a)    the judgment debtor, prospective judgment debtor or another person absconds;

(b)    the assets of the judgment debtor, prospective judgment debtor or another person are:

(i)    removed from Australia or from a place inside or outside Australia; or

   (ii)    disposed of, dealt with or diminished in value.

…

(6)    Nothing in this rule affects the power of the Court to make a freezing order or ancillary order if the Court considers it is in the interests of justice to do so.

19    As was submitted by counsel for Mr O’Kearney, the threshold question is whether the applicant has a good arguable case on a prospective cause of action, being one that is more than barely capable of serious argument and yet not necessarily one which can be identified as having a better than 50 per cent chance of success. It is not necessary on an application of this nature that there be proof on the balance of probabilities: Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 325.

20    In the present case the necessary threshold step has been established. On the evidence presently before the Court, the transfers by Mr Anthony for no good consideration to Ms Zammit of PEC represent nothing more than a shifting of Mr Anthony’s assets. His initial explanation for them indicates that such is the case. Prima facie the trustee in bankruptcy is entitled to the return of those funds. Further, Mr Anthony’s failed explanations for the transfers gives rise to the suspicion that the money was transferred in an attempt to defeat his creditors.

21    It appears that the respondents have at some stage, albeit not on affidavit, raised some form of answer to that claim. They seem to have suggested previously that they had advanced $623,994.25 to Mr Anthony and that the transactions represented a repayment of that debt. Mr O’Kearney in his affidavit has observed there are some problems with that claim. First, the loan documentation produced to substantiate the alleged loan postdates the alleged repayment of the debt. That has not been explained.

22    Secondly, it appears that there has been no compliance with the loan agreement, as appears from its terms, as between the parties who are family members. It must also be added that the respondents have not adduced any evidence on this application to substantiate any answer to the trustee in bankruptcy’s claim. They have not sought to answer it even in the most cursory manner. Further, as counsel for Mr O’Kearney points out, the proffered answer by the respondents that the transfers were the repayment of the loan is only referable to a portion of the amount claimed. It follows that a substantive case has been raised on the material before the Court.

23    The next question is whether there is evidence on which it can be concluded that there is a danger that the judgment or prospective judgment will be wholly or partially unsatisfied for a reason identified in r 7.35. Necessarily, on applications of this nature, the existence of such a danger will arise as a matter of inference from the circumstances. If circumstances exist from which a prudent sensible commercial person can properly infer a danger of dissipation, such danger can be inferred and that can arise in the case of fraudulent misappropriation of assets or serious wrongdoing which supports an inference that the respondent will not preserve its assets: Patterson v BTR Engineering at 321-322.

24    In Birketu Pty Ltd v Westpac Banking Corporation (No 2) [2018] NSWSC 494, Garling J observed that, where a plaintiff has a claim in the nature of a proprietary claim to money, there is an obvious risk of injustice to it if that money was expended on the defendant’s living expenses and legal expenses. If the plaintiff is ultimately successful in obtaining relief, its funds would have been used to finance the defendant’s unsuccessful defence, compounding the loss which has already been suffered. As his Honour identified, a careful and anxious judgment is required to assess whether any injustice to the plaintiff is outweighed by any potential injustice to the defendant if precluded from accessing funds and, therefore, denied the opportunity to advance an arguable defence.

25    As I mentioned, it appears that in dealings with the trustee in bankruptcy the respondents have raised some form of answer to the claims in relation to the transfer and they have suggested the existence of the loan, but that has not been adduced on evidence today.

A danger of dissipation of the assets

26    Mr O’Kearney has established on this application that there exists a real danger that, if a freezing order is not made, there is a real risk that he will be denied the benefits of any successful judgment.

27    Firstly, he points to Mr Anthony’s unsatisfactory credit history. Mr Anthony has a predisposition to failing to meet the claimed creditors of a company of which he has control. He has been banned from managing companies, although there is a real possibility that he is also now managing PEC. That risk cannot be denied.

28    Secondly, the respondents to this application have refused and failed to comply with Mr O’Kearney’s request pursuant to s 77A of the Bankruptcy Act to produce information, books and records regarding their association with the bankrupt. That is a strong indication that the respondents are attempting to prevent Mr O’Kearney understanding the transactions engaged in by Mr Anthony.

29    That will necessarily lead to delay and that is the obvious and necessary consequence of their conduct. The only reason that they could desire delay would appear to be to give them an opportunity to dissipate assets. That is an inference only, but in the absence of any adduced evidence by the respondents, it is one which arises clearly and the court should act on.

30    Thirdly, the respondents have been less than forthcoming in corresponding with Mr O’Kearney or responding to his letters of demand and that too evinces a predisposition towards attempting to avoid their obligations.

31    Fourthly, the respondents have failed to adequately explain the transactions to which I have referred. They have failed to adduce any relevant evidence before this court on Mr O’Kearney’s application. His allegations go unexplained. They have produced a number of bank statements, which have been heavily redacted, and the loan document, which is of doubtful veracity. The respondents and Mr Anthony have not been able to explain the inconsistencies with that loan documentation.

32    Fifthly, the bankrupt, who seems to have significant control over the respondents, proffered a false explanation as to why the transfer of funds to PEC and Ms Zammit occurred. Neither he nor the respondents have given any explanation for that.

33    Mr O’Kearney has obtained some bank records which suggest that money is being transferred to Mr Anthony from the transferred funds. The transfers are identified as wages to Mr Anthony, although, as the trustee in bankruptcy points out, Mr Anthony claims to be unemployed.

34    The respondents have failed to adduce any evidence to this court as to the assets which they hold other than the funds transferred to them by Mr Anthony. They have not sought to show that any money that they have expended on day-to-day expenses or otherwise is derived from their own sources.

35    The absence of any documentation deposing to the assets of the respondents is, I think, a significant matter in this case. It should be recorded that Ms Zammit, who appeared for herself, constantly asserted from the bar table that she had no ability to make payments or engage lawyers without selling the apartment in which she presently lives. Now, I make no comment on the veracity of those statements, because I cannot act on them. They are not evidence before the Court. But I can say that on the material adduced before this Court on this application, I am left with a situation where the respondents have had the opportunity to explain to the Court their financial position but have chosen not to do so.

36    Finally, I accept the submission on behalf of the applicant that Mr Anthony’s conduct of this litigation on behalf of his mother and on behalf of PEC, as I referred to earlier, raises a suspicion that he is attempting to act contrary to the interests of the trustee in bankruptcy and in that way trying to defeat his creditors.

37    It is also relevant that the trustee has formed a reasonable view that the pending sale of the property in which Ms Zammit and Mr Anthony live may represent an effort to divest PEC of its assets.

38    Again, before the Court today, Ms Zammit complained that she was not able to sell the land and required the trustee in bankruptcy to remove his caveat. It may be she does not understand conveyancing practice. But it is quite clear that the sale can proceed, and no doubt the caveat can be removed on settlement, in exchange for having the surplus funds payed to an appropriate account.

39    It is apparent there is no prejudice to the respondents if the order is made. That conclusion is reached because they failed to provide any affidavit evidence in response to this application which might suggest the existence of any detriment. In any event, if in time they wish to show that such is the case, they may apply to the Court to lift or vary the orders. In order to do so, they would need to go on oath in relation to the relevant issues and possibly subject themselves to cross-examination.

40    It would also be relevant in the exercise of that power, being to lift or vary the orders, to know whether the respondents have complied with their obligations under the Bankruptcy Act and the orders of this Court. Non-compliance with those obligations might suggest a continuing intention to attempt to defeat the trustee in bankruptcy. I add too that in the orders sought by the trustee in bankruptcy, appropriate carve-out provisions are made to ensure that living expenses are provided for, as is an opportunity to use funds to pay reasonable legal expenses. The orders also proposed enable the freezing order to be lifted if security is provided for the sums in respect of which the trustee in bankruptcy claims.

Associate:    

Dated:    2 August 2019