Federal Court of Australia

Mokhtar v Piscopo [2024] FCA 493

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 90-15 of the Insolvency Practice Schedule (Bankruptcy) to the Bankruptcy Act 1966 (Cth) the Respondent cease to be the trustee of the bankrupt estate of Ahmad Shaib Mokhtar.

2.    On or before 4pm on 3 June 2024, the parties are to indicate to the Court whether they wish to be heard separately on costs.

3.    In the event that agreement between the parties as to the appropriate orders for costs is not reached:

(a)    the parties are to agree a timetable by 4pm on 5 June 2024 in which short submissions on, and any evidence with respect to, costs are to be filed and served; and

(b)    subject to further order of the Court, any issue as to costs is to be determined on the papers.

4.    Liberty to apply.

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

REASONS FOR JUDGMENT

PERRY J:

1.    INTRODUCTION

1    The applicant, Mr Ahmad Shaib Mokhtar, has been bankrupt since 14 March 2018, when a debtor’s petition was filed on his behalf by his financial adviser and accepted by the Official Receiver. The respondent, Mr Samuel Piscopo (the Trustee), is a former solicitor and has been a bankruptcy trustee since 26 August 2003. He has been an insolvency practitioner since 1996. He was appointed as trustee of the applicant’s bankrupt estate on 14 March 2018. By orders made on 10 July 2023, the (then) second respondent, the Inspector General Bankruptcy, was disjoined from the proceeding.

2    On 24 August 2022 and before the first case management hearing, Mr Mokhtar (who was then unrepresented) filed an Amended Originating Application which sought final relief against the Trustee, and interim orders against the Trustee and the Official Receiver. The application for interim relief was never prosecuted and the Official Receiver did not participate in any way in the proceedings although he filed a notice of acting on 9 May 2024, being a couple of days before judgment delivery. I also note that, while the Administrative Appeals Tribunal (AAT) was originally joined as the third respondent in the originating application, the amended originating application omitted the AAT and any prayer for relief against it. In those circumstances and given that the AAT did not file a notice of acting and has taken no part in the proceedings, I have assumed that it was never served.

3    On 1 September 2022, Markovic J, as duty judge, made orders for the issue of a certificate referring Mr Mokhtar for pro bono legal assistance. Mr Karam accepted the brief and appeared with his junior, Mr Noakhtar. The Court wishes to express its gratitude to both counsel for their very considerable assistance.

4    By his Further Amended Application, filed on 9 December 2022, the applicant seeks orders pursuant to s 90-15 of the Insolvency Practice Schedule (Bankruptcy) to the Bankruptcy Act 1996 (Cth) that the Trustee cease to be the trustee of Mr Mokhtar’s bankrupt estate.

5    I note that initially, the applicant also sought the appointment of a replacement trustee. However, it is now common ground that this order is unnecessary. By operation of s 160 of the Bankruptcy Act, the Official Trustee would be the trustee of the estate if the Trustee were removed: Coshott v Coshott [2013] FCA 156 (Buchanan J) at [1]; O’Brien v Sheahan [2004] FCA 608 at [56]. The Further Amended Application sought various other orders, but those are no longer pressed.

6    The applicant seeks orders to remove the Trustee on the basis that his relationship with the Trustee has irretrievably broken down.

7    As expressed in his written submissions in opening, the applicant’s case that the Trustee should be removed rested on three bases, individually or cumulatively, namely:

(1)    there is a legitimate concern that the Trustee has not acted independently and with reasonable diligence, particularly by reference to the May Letter [being the letter from the trustee to the applicant dated 3 May 2021 (3 May letter)] … and multiple objections lodged after December 2021 …;

(2)    there has been an irreparable breakdown of trust in the relationship between Mr Mokhtar and the Trustee, such that it is untenable for the Trustee to continue administering the bankrupt estate of Mr Mokhtar; and

(3)    the volume and frequency of objection notices, as well as their timing in the life of the bankruptcy, gives rise to legitimate concerns that the notices have been issued for purposes other than advancing the legitimate interests of the bankrupt estate.

(Applicant’s submissions in opening, filed on 15 June 2023 (AS) at [6].)

8    As to ground 1, by “independently” I understand the applicant to mean with the objectivity required of a trustee in bankruptcy, in line with the tenor of the applicant’s case, as presented at trial.

9    The Trustee actively opposed the application, in contrast to other cases where a trustee in bankruptcy played a limited role only in the proceedings or, alternatively, has made a submitting appearance: see, eg, Borg v de Vries (Trustee), in the matter of Bankrupt Estate of David Morton Bertram [2018] FCA 2116 at [5].

10    In the Trustee’s submission, even allowing that the relationship between the applicant and the Trustee is deeply acrimonious, regard must be had to the totality of the relationship between the parties. Viewed as a whole, the Trustee submitted that it is apparent that it is the applicant’s conduct which caused the breakdown in the relationship (Respondent’s opening submissions filed 23 June 2023 (RS) at [5]). In his opening submissions at [54], the Trustee submitted that:

Mr Mokhtar, through his own actions, finds himself where he is today and he should not now be permitted to, as a result of this conduct, apply for Mr Piscopo’s removal. The evidence of the shortcomings in Mr Mokhtar’s conduct is clear and includes failing to pay his full income contributions, misleading Mr Piscopo as to his income and assets, exercising employee stock options without accounting to the bankrupt estate, destroying his records and hampering Mr Piscopo’s investigations, and withholding information regarding the settlement with his ex-wife.

11    The Trustee submits, therefore, that no sufficient cause has been established to remove him. To do so, in the Trustee’s submission, would effectively allow the applicant to benefit from his own poor behaviour. The applicant accepts that if he had knowingly contrived of the situation, it would be inappropriate to make orders removing the Trustee. However, the applicant alleges that he disclosed what was required to his financial advisor, on whom he relied to prepare his statement of affairs, and that, rather than intentional concealment of information by the applicant, there were a number of genuine misunderstandings between the parties.

12    The Trustee’s approach was therefore wider, requiring consideration of the totality of the parties’ relationship in order to consider the reasons for the breakdown in the relationship and whether the evidence establishes a lack of objectivity by the Trustee in his administration of the bankruptcy.

13    The parties reconciled their different approaches to the issues for determination to some extent in their pre-trial Joint List of Legal and Factual Issues, dated 12 July 2023 (Joint List). Specifically, at a minimum the parties agreed that the various legal and factual issues for determination derived from:

(1)    the 3 May 2021 letter (Joint List no’s 1–3);

(2)    the Trustee’s investigations and his objections to Mr Mokhtar’s discharge from bankruptcy (Joint List no’s 4–6);

(3)    the breakdown in relationship between the Trustee and Mr Mokhtar (Joint List no 7);

(4)    replacement of the Trustee and the best interests of the bankrupt estate (Joint List no 8 (agreed)); and

(5)    other issues concerning relief (Joint List no’s 9–10).

14    As to the nature and scale of the task before the Court, it must be borne in mind that the focus is ultimately upon what is in the best interests of the bankrupt estates and that, as the applicant submitted in closing:

Mr Mokhtar’s conduct and interactions with the Trustee are relevant to the Court’s consideration of the Application. It is submitted that focus must ultimately remain on what is in the best interests of the bankrupt estate. While that necessarily implicates the Trustee’s administration of the bankrupt estate (since it is his occupation of office which is challenged), the applicant does not seek (nor is it appropriate for this Court to be burdened with) an administrative review of 17 Objection Notices or an enquiry into the professional conduct of the Trustee or statutory liability of Mr Mokhtar.

15    It is also important to stress that this is not a case where it is said that the Trustee has engaged in misconduct. The Trustee has not acted negligently or otherwise in breach of duty in the administration of the bankrupt’s estate. A case to that effect was expressly disavowed by the applicant’s counsel.

16    Nonetheless, it should be acknowledged that this is a troubling matter. The applicant has been in bankruptcy for just on 6 years. There is no apparent end in sight to the bankruptcy, subject to the effective statutory maximum of 8 years: s 149A(2)(a)(i) of the Bankruptcy Act. As Banks-Smith J recently observed in Duckworth v Field [2023] FCA 801 at [3], “[t]o be bankrupt for a period of eight years is no small thing.” Further, on 10 April 2018, in his initial remuneration notice, the Trustee estimated that his remuneration for the administration of the estate would be $17,180 plus GST and disbursements. By the time the matter proceeded to trial, the respondent estimated the Trustee’s fees to be $311,120.00. This sum included $118,214.00 remuneration for 307.10 hours of time spent personally by the Trustee in preparing for this proceeding.

17    In addition, prior to the trial, the Trustee estimated the disbursements incurred in the administration of the bankruptcy to be $91,336.74, of which $52,841.34 were legal costs associated with this litigation. Of the total amount, $86,676.36 had been paid with only $4,660.38 still owed to the Trustee.

2.    SUMMARY OF KEY FINDINGS

18    For the reasons that follow, the applicant has established that it is appropriate to order that the Trustee cease to be trustee of the bankrupt estate of Mr Mokhtar. In view of the length of my reasons, I considered that it would be helpful to summarise some of my key findings at the outset.

19    First, this is not (as I have said) a case where it was alleged, or I have found, any misconduct on the part of the Trustee.

20    Secondly, I have not accepted that the 17 Objection Notices which were filed by the Trustee between December 2021 and October 2022 were filed for an improper purpose.

21    Thirdly, it is evident that the bankruptcy has caused profound bitterness and stress for all concerned. More fundamentally, however, I have found that there is an irretrievable breakdown in the relationship between Mr Mokhtar and the Trustee. While I have found that Mr Mokhtar’s repeated failure to grasp or comply with basic aspects of his obligations as a bankrupt was not intended to engineer the Trustee’s removal, it has unquestionably contributed and contributed substantially to the irretrievable breakdown in the relationship. However, there were other material contributing factors. These include that Mr Mokhtar genuinely and reasonably misunderstood correspondence from the Trustee on 3 May 2021 and the associated calculator to mean that a payment of $66,000 would suffice for him to be discharged from bankruptcy. I have also formed the view that the Trustee has developed a lack of objectivity during the course of administering the bankruptcy and that this has exacerbated the situation. That lack of objectivity is perhaps understandable in light of Mr Mokhtar’s conduct, including Mr Mokhtar’s completely inappropriate, and at times vicious, language and allegations in later correspondence with the Trustee. I also did not consider that the Trustee’s delay in, among other things, undertaking investigations into aspects of the bankruptcy, taking steps to protect the assets of the bankrupt’s estate and, in particular, in garnisheeing Mr Mokhtar’s income, were satisfactorily explained, especially in circumstances where the Trustee was aware even before the bankruptcy of Mr Mokhtar’s gambling, drinking, and inability to control his spending. These matters show, respectfully, deficiencies in the Trustee’s judgement which have impacted adversely on the administration of the bankrupt estate. It is the combination of these factors in particular which have led me ultimately to the view that it would not, be in the best interests of the bankruptcy for the Trustee to continue.

22    Finally, this outcome should not be understood in any way as a vindication of Mr Mokhtar’s conduct during the bankruptcy. It needs to be said in no uncertain terms that Mr Mokhtar needs to start accepting responsibility for his actions including: ensuring that he fully understands and complies with his obligations as a bankrupt; ensuring that he fully cooperates with the new trustee; and ensuring that he acts at all times with respect and courtesy towards the new trustee and towards Mr Piscopo to the extent to which they may have contact during the handover period.

3.    STATUTORY FRAMEWORK AND RELEVANT PRINCIPLES

23    The applicable legal principles are largely not in dispute.

24    The applicant seeks orders under s 90-15 of the Schedule to the Bankruptcy Act. That provision relevantly provides that:

(1)    The Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate.

Orders on own initiative or on application

(2)    The Court may exercise the power under subsection (1):

(a)    on its own initiative, during proceedings before the Court; or

(b)    on application under section 90-20.

Examples of orders that may be made

(3)    Without limiting subsection (1), those orders may include any one or more of the following:

…

(b)    an order that a person cease to be the trustee of the estate;

…

(4)    Without limiting the matters which the Court may take into account when making orders, the Court may take into account:

(a)    whether the trustee has faithfully performed, or is faithfully performing, the trustee’s duties; and

(b)    whether an action or failure to act by the trustee is in compliance with this Act and the Insolvency Practice Rules; and

(c)    whether an action or failure to act by the trustee is in compliance with an order of the Court; and

(d)    whether the regulated debtor’s estate or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the trustee; and

(e)    the seriousness of the consequences of any action or failure to act by the trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group.

25    Section 90-15 of the Schedule therefore confers a discretion on the Court to make orders removing the trustee in the exercise of which the Court may take into account, but is not limited to, the matters identified in s 90-15(4). Section 90-20 in turn provides that:

(1)    Each of the following persons may apply for an order under section 90‑15:

(a)    a person with a financial interest in the administration of the regulated debtor’s estate;

(b)    if the committee of inspection (if any) so resolves—a creditor, on behalf of the committee;

(c)    the Inspector-General.

(2)    If an application is made by a person referred to in paragraph (1)(b), the reasonable expenses associated with the application are to be taken to be expenses of the administration of the estate.

26    The effect of s 90-15(1), (2)(b) and (3) and s 90-20(1)(a) of the Schedule is that the Court may, on the application of a person with a financial interest in the administration of a regulated debtor’s estate, make orders in relation to the administration of the estate, including that a person cease to be the trustee of the estate in bankruptcy. A “regulated debtor” includes a bankrupt: s 5-15(a) of the Schedule. A person has a “financial interest” in the administration of a regulated debtor’s estate if the person is the regulated debtor: s 5-30(a)(i) of the Schedule.

27    I am therefore satisfied that the Court has jurisdiction to entertain Mr Mokhtar’s application for an order that the Trustee cease to be the trustee of Mr Mokhtar’s estate: see e.g. Shaw v The Official Trustee in Bankruptcy (No 3) [2021] FCA 1569 at [10]–[11] (Wigney J).

28    The relevant principles governing the exercise of the discretion in s 90-15 may be summarised as follows.

29    First, the general duties of the trustee in bankruptcy and the limited role of the Court provide important context against which to consider the matters raised by the applicant, even though there is no allegation of a breach of duty in the present case. The law in this regard is well-established and conveniently explained by Wigney J in Shaw at [27]–[29] as follows:

A trustee in bankruptcy is subject to the general law relating to trustees, except where bankruptcy legislation modifies the general law: Adsett v Berlouis (1992) 37 FCR 201 at 208-210. In Adsett, the Full Court adopted the following observations of Smithers J in Mannigel v Aitken (1983) 77 FLR 406 at 408-409 as a correct statement of the duties, and the proper manner of performance of those duties, of a trustee in bankruptcy:

In the case of bankruptcy the Trustee is in charge of the assets of the bankrupt and those assets are to be applied for the benefit of the creditors and if there be any surplus for the benefit of the bankrupt. It is clear that the minimum standard required of the Trustee is that he shall handle the assets with a view to achieving the maximum return from the assets to satisfy the claims of the creditors and to provide the best surplus possible for the bankrupt. Obviously a great deal of discretion and judgment is required to be exercised by the Trustee. It was said by Rogerson J in Re Ladyman (1981) 55 FLR 383 at 394-396 that the standard of conduct required of the Trustee will ordinarily be the standard required of a professional man and perhaps higher. The learned judge referred to “the high standard of conduct required of trustees”.

In Re Brogden [1888] All ER 927 Lord Justice Fry said at p 935:

“A Trustee undoubtedly has a discretion as to the mode and manner, and very often as to the time in which or at which, he shall carry his duty into effect. But his discretion is never an absolute one. It is always limited by – the dominant duty – the guiding duty of recovering, securing and duly applying the trust fund; and no Trustee can claim any right of discretion which does not agree with that paramount obligation.”

…

As has already been noted, in [Re Tyndall (1977) 30 FLR 6], Deane J referred (at 10) to the “well-established policy under bankruptcy legislation that the court should not unduly interfere with the day-to-day administration of a bankrupt’s estate by a trustee”. His Honour continued (at 10):

The trustee is made responsible for the administration of the bankrupt estate under the general provisions of the Act. He must, in the course of that administration, make a variety of decisions aimed at enabling the administration to be carried out with promptness and efficiency. Some of these decisions will be business or commercial decisions in which the business or commercial experience of the trustee would itself provide a basis for arguing that, unless it were shown that the trustee’s decision was perverse or clearly wrong, it would be inappropriate and unjust for the court to interfere.

In Patel v Ruhe [2016] FCA 520, Buchanan J said (at [33]):

Although a trustee may not disregard the legitimate interests of a bankrupt, a primary duty of a trustee is to protect the interests of creditors and recover for the estate such property as may reasonably be recovered in a commercially sound way. Judgments are required. The judgments are ones for the trustee to make and the Court will normally not interfere unless it is clear that some maladministration of the estate has occurred or is likely …

    (Emphasis in original.)

30    The caution sounded in the authorities cited by Wigney J against undue interference by the Court in the administration of bankruptcy is a matter to which I have had particular regard in the exercise of discretion in the present case.

31    That caution was repeated in Frigger v Trenfield (No 10) (2021) 397 ALR 24 (Frigger (No 10)), where Jackson J considered an application relevantly seeking an order under s 90-15(3)(b) of the Schedule that a trustee of certain bankrupt estates cease to be the trustee (at [553]). His Honour helpfully summarised the trustee’s duties relevantly as follows at [555]–[556] and [558]–[559]:

A trustee in bankruptcy must act to the standard expected of an officer of the court, given that his or her acts or omissions are, in general, reviewable by the court. ‘That is because the statutory office of a trustee in bankruptcy is a public one that reposes considerable statutory powers in the trustee to enable him or her to carry out the public duty to administer the bankrupt’s estate according to the Act’: Young v Thomson [2017] FCAFC 140; (2017) 253 FCR 191 at [115] (Siopis and Rares JJ).

Because the trustee is exercising a fiduciary power, he or she has a duty to do so honestly (i.e. in good faith), to act upon genuine consideration, and not to act irresponsibly, capriciously or wantonly. The trustee must exercise the relevant power with due consideration for the purpose for which it was conferred and not for some ulterior purpose. A professional trustee should be particularly careful to act strictly within the line of the trustee’s duty: Young v Thomson at [110]-[111].

…

Other expressly stated objects of the Insolvency Practice Schedule are to ensure that any person registered as a trustee has an appropriate level of expertise and behaves ethically: s 1-1(1)(a) and (b). There is also a large number of specific duties imposed on trustees in bankruptcy by statute. They relevantly include:

•    determining whether the estate includes property that can be realised to pay a dividend to creditors (Bankruptcy Act s 19(1)(b));

•    taking appropriate steps to recover property for the benefit of the estate (Bankruptcy Act s 19(1)(f));

•    administering the estate as efficiently as possible by avoiding unnecessary expense (Bankruptcy Act s 19(1)(j));

•    exercising powers and performing functions in a commercially sound way (Bankruptcy Act s 19(1)(k));

•    acting honestly and impartially in relation to each administration (Insolvency Practice Rules (Bankruptcy) 2016 (Cth) (Bankruptcy Practice Rules) r 42-10(1);

•    not making or signing a document that the trustee knows, or ought reasonably to know, is false or misleading in a material particular (Bankruptcy Practice Rules r 42-10(2)); and

•    taking care to ensure that all communications, including reports (whether issued personally or by delegation) are accurate and do not omit or obscure information required to be included or relevant to users of the communication (Bankruptcy Practice Rules r 42-15(2)).

It is also relevant in this proceeding that, under the Bankruptcy Practice Rules, the trustee must undertake preliminary inquiries and actions at the start of each administration, including:

•    obtaining and reviewing the statement of affairs of the regulated debtor (Bankruptcy Practice Rules r 42 30(b));

•    if necessary, interviewing the regulated debtor to clarify any matters in the statement of affairs (Bankruptcy Practice Rules r 42-30(c));

•    identifying and making an assessment of realisable assets that could be expected to provide a return to creditors or contribute to the payment of the costs and fees of the administration (Bankruptcy Practice Rules r 42-30(d));

•    determining the likelihood of whether the estate of the regulated debtor includes property that can be realised to pay a dividend to creditors (Bankruptcy Practice Rules r 42-30(f));

•    if the trustee has a genuine reason for believing that the bankrupt may not have disclosed an interest in real or other registered property – conducting appropriate searches for such property (Bankruptcy Practice Rules r 42-30(g));

•    if information so obtained shows that the bankrupt has not made full and true disclosure of his or her interest in property, making inquiries of third parties about the information (or if further inquiries are not made, explaining to the creditors why they were considered unnecessary) (Bankruptcy Practice Rules r 42-30(h)); and

•    if the trustee considers that there may have been antecedent transactions, making inquiries of third parties to identify those transactions (Bankruptcy Practice Rules r 42-30(i)).

(Emphasis added.)

32    Secondly, s 90-15 of the Schedule replaced s 179 of the Bankruptcy Act, reforming the process of removing a trustee. Importantly, under the former provision, removal could occur only following a two-part process. An applicant had first to establish grounds for an inquiry into the conduct of the trustee before a Court could order the trustee’s removal. That is no longer a requirement under s 90-15. As White J held in Borg (at [24]):

In contrast with the former s 179(1), s 90-15 does not require a two stage consideration. An applicant seeking the removal of a trustee does not have to establish proper grounds for an inquiry. The power to remove and replace is not made subject to conditions such as proof of error, misfeasance, negligence or other poor conduct by a trustee.

(Emphasis added.)

33    I note, however, that there may still be cases where it is nonetheless appropriate to embark on a two-stage process similar to that under s 179 of the Bankruptcy Act. As Wigney J explained in Shaw at [21], “[s]uch an approach may be appropriate where the orders sought by the applicant are based on broad allegations of misfeasance, neglect or other error in the conduct of the administration of the estate by the trustee, particularly where those allegations effectively encompass almost every aspect of the administration of the estate.” However, while at times the Trustee’s submissions appeared to stray into such an approach, neither party suggested that the present matter was a case where that approach should be adopted.

34    Thirdly, the enactment of s 90-15 more closely aligned the rules for the removal of trustees in personal bankruptcies with those for the removal of liquidators in corporate insolvencies: Pioneer Australia Pty Ltd v Bettles as Trustee of the Bankrupt Estate of Quinn [2020] FCA 1788 at [30] (Derrington J); Borg at [26]. The principles and case law concerning the removal of liquidators may therefore apply by analogy when considering whether to remove a trustee in bankruptcy.

35    Fourthly, and of particular relevance, the Court’s power to remove a liquidator (and, by analogy, a bankrupt) “is not limited to matters relating to the unfitness of the liquidator to hold office”: Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) [2003] NSWSC 496; (2003) 21 ACLC 1330 at [58] (Austin J). Rather, “[i]t is open to the applicant for removal to point to any conduct or inactivity on the liquidator’s part that provides a basis for the conclusion that he or she should be removed, ranging from moral turpitude, to bias or partiality, lack of independence, incompetence or other unfitness for office”: Domino at [58]. The relevant authorities are helpfully discussed by White J in Borg at [29]–[33] (White J) as follows:

In Re Adam Eyton Ltd; ex parte Charlesworth (1887) 36 Ch D 299, Cotton LJ said, at 303–4:

[I]t is not necessary, in order to justify the Court under this section in removing the liquidator, that there should be anything against the individual. In my opinion, although of course unfitness discovered in a particular person would be a ground for removing him, yet the power of removal is not confined to that, … [I]f the Court is satisfied on the evidence before them that it is against the interest of the liquidation, by which I mean all those who are interested in the company being liquidated, that a particular person should be made liquidator, then the Court has power to remove the present liquidator, and of course then to appoint some other person in his place.

To like effect, Bowen LJ said at 306:

In many cases … unfitness of the liquidator will be the general form which the cause will take upon which the Court in this class of case acts, but that is not the definition of due cause shewn. In order to define “due cause shewn” you must look wider afield, and see what is the purpose for which the liquidator is appointed. To my mind the Lord Justice has correctly intimated that the due cause is to be measured by reference to the real, substantial, honest interests of the liquidation, and to the purpose for which the liquidator is appointed. Of course, fair play to the liquidator himself is not to be left out of sight, but the measure of due cause is the substantial and real interest of the liquidation.

Austin J applied the approach of Bowen LJ in Re Adam Eyton in Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) [2003] NSWSC 496; (2003) 21 ACLC 1330:

[58]    The words “cause shown” indicate that a liquidator is not to be removed unless there is some ground for removal, and the ground must be established by evidence. However, “cause shown” is not a narrow concept. It is open to the applicant for removal to point to any conduct or inactivity on the liquidator’s part that provides a basis for the conclusion that he or she should be removed, ranging from moral turpitude, to bias or partiality, lack of independence, incompetence or other unfitness for office. But the concept of “cause shown” is not limited to matters relating to the unfitness of the liquidator to hold office. In Re Adam Eyton Ltd; ex parte Charlesworth (1887) 36 Ch D 299, speaking of a statutory formulation where the words used were “due cause shown” rather than “cause shown”, Bowen LJ said (at 306) … [see the passage just quoted]:

[59]    In Network Exchange Pty Ltd v MIG Communications Pty Ltd (1994) 13 ACSR 544, Hayne J applied this test to an application for removal of an administrator, even though the statutory provision authorising the Court to remove an administrator (s 449B) does not contain the words “on cause shown”. His Honour concluded that the absence of those words did not produce any marked difference, and he described the position as follows (at 550):

“In my view, however, it must be accepted that an order for removal should be made only if it is demonstrated that such an order would be for the better conduct of the administration. It is not to be contemplated that the power under s 449B is to be exercised save in circumstances that justify or require its exercise and those, speaking generally, would appear to be circumstances in which the order would conduce to the better conduct of the administration concerned.”

[60]    In cases where the applicant relies on misconduct by the liquidator, the words “cause shown” do not require the Court to work through each of the particulars of misconduct relied upon, and determine one by one whether they are made out. Young J (as the Chief Judge in Equity then was) rejected such an approach in Re Biposo Pty Ltd (1995) 17 ACSR 730. His Honour said (at 734):

“The question is not whether in adversarial litigation there has been proof of a case according to the heads particularized, … but rather whether in the interests of the public the removal of the liquidator would be for the general advantage of persons interested in the winding up”.

In Australian Securities and Investments Commission v Franklin [2014] FCAFC 85; (2014) 223 FCR 204 at [55], this Court applied the approach of Austin J in Domino Hire.

I conclude that the approach in the corporations cases to s 503 and its predecessors is apposite in relation to the removal and replacement of the trustee in bankruptcy under ss 90-15 and 90-20 of the Bankruptcy Schedule. The Court should exercise the power to remove and replace a trustee in bankruptcy in a manner which best advances the interests of the bankruptcy, having regard to the objects of the Bankruptcy Act. Having regard to s 1-1(2)(b) of the Bankruptcy Schedule, the proper interests of the creditors of the bankrupt will be an important consideration.

(Emphasis added.)

36    Those principles are equally apt to apply in the context of bankruptcy: Borg at [33].

37    Fifthly, where the relationship between the trustee and the bankrupt “has totally broken down; that, in many cases, is a sufficient reason for the trustee to be removed”: Doolan v Dare [2004] FCA 682 at [49] (Spender J); see also, eg, Trkulja v Morton [2005] FCA 659 at [4] (Gray J). Similarly, Jagot J held in Liprini v Pascoe as Trustee of the Bankrupt Estate of Liprini [2012] FCA 886; (2012) 292 ALR 778 at [22] (in the context of an application by the major creditor of the bankrupt estate under s 179 of the Bankruptcy Act) that:

[T]he powers to remove a trustee are not dependent on misconduct. There is ample authority that a breakdown in the relationship between at least the major creditor and the trustee may be sufficient, both for the purposes of an inquiry and for removal.

38    Sixthly, the mere breakdown in a relationship between the trustee and bankrupt will not always justify removal of the trustee. As Buchannan J held in Boensch v Pascoe [2007] FCA 1977 at [92]–[93] (also in the context of an application under s 179):

Obviously enough, a bankrupt should not be allowed, by an assiduous pattern of resistance to the trustee of his estate, to generate and then rely upon a suggested reason for removal thereby created. No doubt there are many instances in which disagreement may arise about the way a trustee is administering an estate or exercising his powers. Adequate opportunities exist for challenges to be made, if there are grounds for doing so. None have been made in the present case, save for the matters with which I am dealing.

It is clearly an insufficient ground for removal of a trustee that a bankrupt resists the proper administration of his estate or sets out to frustrate a trustee in the proper performance of his duties. Mr Boensch’s obligation was to co-operate fully with his trustee. He is obliged to ‘aid to the utmost of his power in the administration of his estate’ (s 77(g)).

39    In other words, a bankrupt cannot, by their conduct in not cooperating with the trustee, cause a complete breakdown in their relationship, and then rely upon the breakdown as a basis upon which to remove the trustee: see also, eg, Trkulja at [62]. As will become apparent, the Trustee’s case focused particularly around this last point.

40    Finally, the duties of the bankrupt are relevant to consider, as the Trustee’s case largely centred on the multiple respects in which he alleged that Mr Mokhtar had failed to comply with those duties. These are enumerated in s 77 of the Bankruptcy Act and include the following:

(1)     A bankrupt shall, unless excused by the trustee or prevented by illness or other sufficient cause:

(a)     forthwith after becoming a bankrupt, give to the trustee:

(i)     all books (including books of an associated entity of the bankrupt) that are in the possession of the bankrupt and relate to any of his or her examinable affairs; and

(ii)     any passport or document issued for the purposes of travel held by the bankrupt; and

(b)     attend the trustee whenever the trustee reasonably requires; and

(ba)     give such information about any of the bankrupt’s conduct and examinable affairs as the trustee requires; and

(bb)     as soon as practicable after the later of the following times:

(i)     the time the bankrupt’s statement of affairs was accepted under subsection 57B(1);

(ii)     the time the bankrupt became a bankrupt;

advise the trustee of any material change that occurred between the time the statement was filed and the later of the times mentioned in subparagraph (i) or (ii); and

(bc)     if a material change occurs at or after the later of the times mentioned in subparagraph (bb)(i) or (ii), advise the trustee of that change as soon as practicable after the change occurs; and

…

(e)     execute such instruments and generally do all such acts and things in relation to his or her property and its realization as are required by this Act or by the trustee or as are ordered by the Court upon the application of the trustee; and

(f)     disclose to the trustee, as soon as practicable, property that is acquired by him or her, or devolves on him or her, before his or her discharge, being property divisible amongst his or her creditors; and

(g)     aid to the utmost of his or her power in the administration of his or her estate.

41    Ryan, Heerey and Allsop JJ (as his Honour then was) summarised the significance of s 77 of the Bankruptcy Act in Griffin v Pantzer [2004] FCAFC 113; (2004) 137 FCR 209 at [175] as:

Without that obligation the very ability of the trustee to perform his or her duties would be frustrated and made unworkable whenever the bankrupt had been, or asserted that there was a risk of finding that he or she had been less than honest.

42    However, the ultimate question for me on the basis of the authorities to which I have referred is whether removal would be in the best interests of the bankruptcy.

4.    EVIDENCE

4.1    Approach to evidence: general principles

43    First, it was not in issue that the onus lay upon Mr Mokhtar to establish grounds for removing the Trustee.

44    Secondly, in approaching my assessment of the evidence I have borne firmly in mind the seriousness of the allegations by the Trustee against Mr Mokhtar, including that he has deliberately concealed assets, destroyed documents, and realised assets without the Trustee’s knowledge or authority. In this regard, in arriving at a state of satisfaction in civil proceedings that a case has been proved on the balance of probabilities, s 140(2) of the Evidence Act 1995 (Cth) provides that:

Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:

(a)    the nature of the cause of action or defence; and

(b)    the nature of the subject-matter of the proceeding; and

(c)    the gravity of the matters alleged.

(Emphasis added.)

45    The considerations to which consideration must be given pursuant to s 140(2) of the Evidence Act align with Dixon J’s observations in Briginshaw v Briginshaw (1938) 60 CLR 336 of how the civil standard of proof at common law operates: see, eg, Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition and Consumer Commission [2007] FCAFC 132; (2007) 162 FCR 466 at [31] (Weinberg, Bennet and Rares JJ). Thus, in an oft-quoted passage at 362 from Briginshaw, Dixon J explained that:

reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency.

46    In other words, as explained by Barwick CJ, Kitto, Taylor, Menzies and Windeyer JJ, the “degree of satisfaction for which the civil standard of proof calls may vary according to the gravity of the fact to be proved”: Rejfek v McElroy [1965] HCA 46; (1965) 112 CLR 517 at 521. This principle, as Flick and Perry JJ observed in Sullivan v Civil Aviation Safety Authority [2014] FCAFC 93; (2014) 226 FCR 555 at [99], “is ultimately founded upon principles of fairness and common sense”.

47    Thirdly, the matters set out in s 140(2) are mandatory but not exhaustive. As Lee J set out in Lehrmann v Network Ten Pty Limited (Trial Judgment) [2024] FCA 369 at [97]:

Other considerations which may be relevant include the inherent likelihood of the occurrence of the fact alleged and the notion that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and the other to have contradicted: Blatch v Archer (1774) 1 Cowp 63 (at 65 per Lord Mansfield).

48    Fourthly, both the applicant and the Trustee ask the Court to draw certain inferences, including in the case of the applicant as to the Trustee’s purpose in issuing multiple objection notices after Mr Mokhtar made a complaint to the Australian Financial Security Authority (AFSA) regarding the Trustee’s letter of 3 May 2021 (the 3 May letter). As to inferential reasoning, Lee J in Quintis Ltd (Subject to Deed of Company Arrangement) v Certain Underwriters at Lloyd’s London Subscribing to Policy Number B0507N16FA15350 [2021] FCA 19; 385 ALR 639 at [105]-[106] said the following:

However, it is also true that where there is no direct evidence of a fact that a party bearing the onus of proof seeks to prove, “it is not possible to attain entire satisfaction as to the true state of affairs”: Girlock (Sales) Pty Ltd v Hurrell (1982) 149 CLR 155 (at 169 per Mason J). However, in such a case, the law does not require proof to the “entire satisfaction” of the tribunal of fact: see Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 (at 141 per Tadgell JA, with whom Winneke P and Phillips JA agreed). Indeed, a party may advance a case relying on circumstantial evidence, on the basis that collectively viewed, a combination of proven facts can provide a sufficient basis for inferring the ultimate fact to be proved. A comprehensive statement as to the sufficiency of circumstantial evidence in a civil case to support proof by inference from directly proved facts was given by the High Court in Bradshaw v McEwans Pty Ltd (1951) 217 ALR 1 (at 5 per Dixon, Williams, Webb, Fullagar and Kitto JJ):

Of course as far as logical consistency goes many hypotheses may be put which the evidence does not exclude positively. But this is a civil and not a criminal case. We are concerned with probabilities, not with possibilities. The difference between the criminal standard of proof in its application to circumstantial evidence and the civil is that in the former the facts must be such as to exclude reasonable hypotheses consistent with innocence, while in the latter you need only circumstances raising a more probable inference in favour of what is alleged. In questions of this sort, where direct proof is not available, it is enough if the circumstances appearing in evidence give rise to a reasonable and definite inference: they must do more than give rise to conflicting inferences of equal degrees of probability so that the choice between them is mere matter of conjecture. But if circumstances are proved in which it is reasonable to find a balance of probabilities in favour of the conclusion sought then, though the conclusion may fall short of certainty, it is not to be regarded as a mere conjecture or surmise …

(Citations omitted).

Furthermore, in assessing a circumstantial case, the question of whether an inference is open and can be drawn as a matter of probability is to be determined by considering the combined weight of all the relevant established facts, rather than by considering each fact sequentially and in isolation: Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 (at [75] per Tate ACJ, Kyrou and Ferguson JJA). Indeed, as the Full Court of this Court recently stated in Australian Broadcasting Corporation v Chau Chak Wing [2019] FCAFC 125; (2019) 271 FCR 632 (at 674 [134] per Besanko, Bromwich and Wheelahan JJ):

In assessing a circumstantial case, it is important to bear in mind that the facts ultimately to be proven are those that are in issue, and not necessarily all the circumstantial facts themselves. As Dawson J observed in Shepherd v The Queen (1990) 170 CLR 573 at 580, “[T]he probative force of a mass of evidence may be cumulative, making it pointless to consider the degree of probability of each item of evidence separately.” This invites consideration of the combined weight of circumstantial facts, for it is the essence of a circumstantial case that the combined force of its components should be considered, and proof of some circumstantial facts may be affected by the court’s assessment of other circumstantial facts: Chamberlain v The Queen (No 2) (1984) 153 CLR 521 at 535 (Gibbs CJ and Mason J). Courts may fall into error by compartmentalising circumstantial facts, rather than standing back and assessing the broader picture.

49    In the fifth place, with respect to the assessment of affidavit and oral evidence and the impact of the passage of time on the quality of evidence, Black J in In Re Kit Digital Australia Pty Ltd (in liq) [2014] NSWSC 1547 explained (at [7]) that:

It is important in this context to have regard to the fallibility of human memory which increases with the passage of time, particularly where disputes or litigation intervene: Watson v Foxman (1995) 49 NSWLR 315 at 318-319 per McLelland CJ in Eq; Hoy Mobile Pty Ltd v Allphones Retail Pty Ltd (No 2) [2008] FCA 810 at [41] per Rares J; Varma v Varma [2010] NSWSC 786 at [424]-[425] per Ward J. To the extent that credit issues need to be determined in respect of particular conversations, I have also had regard to the fact that objective evidence is likely to be the most reliable basis for determining them. I summarised the relevant principles in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 789 at [10], where I noted that the credibility of a witness and his or her veracity may be tested by reference to the objective facts proved independently of the testimony given, in particular by reference to the documents in the case, by paying particular regard to the witness’s motives and the overall probabilities: Armagas Ltd v Mundogas SA [1985] 1 Ll R 1 at 57; Camden v McKenzie [2007] QCA 136; [2008] 1 Qd R 39 at [34]; Craig v Silverbrook [2013] NSWSC 1687 at [141]; State of New South Wales v Hunt [2014] NSWCA 47 at [56].”

50    These principles were recently approved, for example, by Markovic J in Scott (Trustee), Stolyar (Bankrupt) v Stolyar [2022] FCA 691 at [22].

51    McLelland CJ in Equity, speaking of the fallibility of human memory in Watson v Foxman and Others (1995) 49 NSWLR 315 at 319, pointedly explained influences that may impact upon the processes of memory with the passing of time:

…human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

52    Similarly, Katzmann J explained in Arnautovic & Sutherland t/as Jirsch Sutherland & Co v Cvitznovic (as trustee of the bankrupt estate of Adrian Lawrence Rosee) [2011] FCA 809 at [73] that:

In the absence of notes it is, generally speaking, impossible to accurately recall the terms of any conversation six months after it took place. Human memory is notoriously unreliable. As Spigelman CJ recently observed (“Truth and the Law”, The 2011 Sir Maurice Byers Lecture, 26 May 2011):

Witnesses can, without any dissimulation or propensity to lie, confidently assert the truth of conversations, observations and events which did not happen. The plasticity of memory impedes the truth finding process. This is not an uncommon phenomenon…

4.2    Mr Mokhtar’s evidence and findings as to credit

53    Subject to rulings and concessions on objections to evidence, the applicant read the following affidavits:

(1)    Paragraphs 1, 5, 7, 29, 30, 33, 34 and 36 of Mr Mokhtar’s affidavit, affirmed on 26 July 2022 (and filed on 8 August 2022);

(2)    Mr Mokhtar’s affidavit, affirmed on 9 December 2022;

(3)    Mr Mokhtar’s affidavit, affirmed on 17 March 2023; and

(4)    Mr Mokhtar’s affidavit, affirmed on 17 July 2023 (Fourth Mokhtar affidavit).

54    Mr Mokhtar was also cross-examined extensively by the Trustee. The Trustee submitted that the Court ought to find that Mr Mokhtar was an unsatisfactory witness, who was interested only in advancing his own interests. For instance, during cross-examination, Mr Mokhtar gave evidence that during the past five years, he had misunderstood various aspects of the administration of the bankruptcy, that aspects had been misrepresented to him and that sometimes he recalled things well but sometimes he did not. The Trustee submitted that those statements were deliberately inaccurate, and that this was not merely a case of a bankrupt who was acting under misunderstandings. Rather, the Trustee contended that Mr Mokhtar’s conduct in the course of the bankruptcy and in giving evidence was characterised by obfuscation.

55    In respect of Mr Mokhtar’s evidence, I have reached the following general conclusions.

56    First, I agree that Mr Mokhtar was an unsatisfactory witness. I found his evidence generally to be evasive. He consistently sought to place the blame on others — in particular, his financial adviser, Mr Humphries, and the Trustee — and he consistently sought to avoid accepting responsibility for his own conduct.

57    I also accept to some extent Mr Mokhtar’s evidence that he has difficulty in recalling aspects of what occurred over the bankruptcy. Mr Mokhtar gave evidence that he has been very stressed and feeling depressed over his bankruptcy. He also told the Court of his problems with gambling and alcohol, the collapse of his marriage, and his financial difficulties. Mr Mokhtar was cross-examined on whether he had a diagnosed mental health condition which contributed to his inability to recall information. While no expert evidence was called, or medical report tendered, I accept Mr Mokhtar’s evidence that at some point in time he was diagnosed with depression by a psychiatrist and/or a psychologist because he was able to volunteer the medicine prescribed to him, the dosage, and the location of the psychiatrist and psychologist who he had consulted. However, he did not give evidence otherwise as to when he met with mental health professional or was diagnosed or as to the impact of his mental health issues on his ability to recall matters. In any event, it is patently clear Mr Mokhtar was under significant stress in the leadup to his bankruptcy and remains so.

58    Nonetheless, in my view, Mr Mokhtar exaggerated his inability to recall events so to avoid taking responsibility for his actions. For example, Mr Mokhtar admitted in cross-examination that he was able to function in his employment as an audiometrist, working across two clinics, despite claiming that throughout the same period he had no memory of preparing or signing the debtor’s petition.

59    In short, I find that Mr Mokhtar’s evidence was unreliable and therefore generally ought not to be accepted absent corroborative evidence, admissions against interest, or where it is inherently plausible.

60    Secondly, certain aspects of Mr Mokhtar’s evidence were corroborated by other evidence which I have accepted. For example, the respondent in cross-examining Mr Mokhtar, was particularly critical of Mr Mokhtar’s purported concealment of information about his assets and liabilities when preparing the debtor’s petition. Mr Mokhtar denied the claim and gave evidence that he disclosed his relevant assets to Mr Humphries, his financial adviser. This evidence was subsequently corroborated to some extent by an apparently contemporaneous financial statement prepared by Mr Humphries (discussed further below). However, the evidence also indicates that there were significant assets and dealings in assets both before and during the bankruptcy by Mr Mokhtar which he did not disclose to his financial adviser or to the Trustee.

4.3    Trustee’s evidence

61    The Trustee relied on three affidavits sworn by the Trustee, namely the first and second affidavits sworn on 20 February 2023 (First Trustee Affidavit and Second Trustee Affidavit) together with their exhibit R5, and the Trustee’s affidavit sworn on 21 March 2023 (Third Trustee Affidavit), together with exhibit R6 thereto. These were received subject to those paragraphs not read, received for a limited purpose, or received only as submissions, in accordance with concessions by the Trustee and my rulings on objections. In addition, the Trustee filed, among other affidavits, an affidavit sworn on 19 September 2023 which Mr Mokhtar tendered into evidence (Fourth Trustee Affidavit).

62    In the body of the affidavits on which he relied, the Trustee included lengthy accounts of conversations that he had purportedly had with the applicant, to which the applicant objected. The accounts were said to be corroborated by independent file notes kept by the Trustee, which purported to record the conversations he had with Mr Mokhtar. The Trustee did not keep individual electronic file notes but a single electronic word document. That document included a mix of non-privileged material and material apparently subject to legal professional privilege. With respect, this is a highly unsatisfactory practice as I observed at the hearing and the Trustee’s counsel accepted. It was also impossible to determine from the single electronic file when individual entries were made and therefore whether the notes of conversations were contemporaneous.

63    At trial, the applicant’s objections to the alleged conversations and file notes were resolved on the basis that the parties would make submissions as to the weight I could ascribe that evidence. The applicant submitted that no weight could be given to the account of the conversations contained in the body of the Trustee’s affidavits. This was because they were reconstructions of events made well after the purported conversations took place, and were often not corroborated by, and at times were inconsistent with, the typed file notes kept by the Trustee. I agree that the word-for-word accounts of conversations in the body of the affidavits cannot generally be given any weight save where, for example, they are corroborated by other evidence for the following reasons. I had a particular concern that the alleged verbatim accounts frequently contained what appear on their face to be self-serving statements by the Trustee which, as I explain below, did not generally find support in the attached file notes.

64    First, the Trustee set out critical conversations between him and the applicant in the body of his affidavits in direct speech, notwithstanding the length of time elapsing between those conversations and swearing of his affidavits. Not only is it inherently unlikely that the Trustee recalled the precise words used in those conversations, but the Trustee’s evidence in cross-examination was to the effect that the conversations were put into direct speech by the Trustee’s solicitor based on the Trustee’s file notes in preparing the first draft of his first affidavit.

65    Where the deponent remembers only the substance or gist of what was said, the conversation should not be set out in direct speech (or in quotation marks) as that gives the misleading impression that the deponent recalls the actual words of the conversation. As Jackman J held in Kane’s Hire Pty Ltd v Anderson Aviation Australia Pty Ltd [2023] FCA 381 at [123]–[128]):

There is ample authority for the proposition that there is no rule of the law of evidence in Australia that evidence of conversations must be given in direct speech… Evidence should be given in direct speech only if the witness can remember the actual words used…

The passage [from the judgment of McLelland CJ in Eq in Watson v Foxman (1995) 49 NSWLR 315 at 318-319 quoted above] is characteristically pithy and insightful. … The statement towards the end of the quoted passage, as to what is actually remembered being little more than an impression from which plausible details are then constructed, is particularly pertinent to the present issue, although many would find his Honour’s reference to that often occurring “subconsciously” to be overly charitable.

The primary duty of a witness is one of honesty. The oath or affirmation binds the witness to tell the truth, the whole truth and nothing but the truth. Witnesses should not be compelled or encouraged into uttering untruths on oath by giving a form of words in direct speech with which they are not happy and which they cannot actually recollect in preference to their own words in indirect speech…

The practice of witnesses and lawyers working up a version of a conversation in direct speech (whether or not prefaced by the phrase “in words to the following effect”) from the witness’s actual memory merely of the substance or gist of what was said is logically, ethically and grammatically wrong. It is logically wrong because it reverses the logical process of deriving the meaning or substance of what was said from the actual words which were spoken; one cannot derive (as distinct from guess at) the actual words spoken simply from their gist. It is ethically wrong because the evidence given as a result of that process conceals the true nature and quality of the witness’s memory, and conveys a false impression of that memory. It is grammatically wrong because the use of quotation marks indicates as a matter of conventional usage that the relevant expression is a quotation of the exact words which were spoken. It could not be said that this practice is allied to an iron sense of principle.

The form in which evidence of conversations is given should reflect the difference between verbatim memory and gist memory. … It would appear that verbatim memory and gist memory of conversations are not merely different in degree, but are also different in kind…

(Citations omitted.)

This passage was recently approved by the NSW Court of Appeal in Gan v Xie [2023] NSWCA 163 at [119] (White JA (Simpson AJA at [126] and Basten AJA at [127] agreeing)).

66    Secondly, certain conversations reproduced in the body of the Trustee’s affidavits were said to have been based on his file notes. However, the Trustee did not give evidence sufficient to establish that the reliability of the file notes, such as how the file notes were prepared, in what form, at what time, and whether he had adopted a general practice in relation to their preparation. This is particularly the case with respect to those notes contained in the single electronic document in which the Trustee apparently kept a running record of the administration of the bankruptcy.

67    Furthermore, as submitted by the applicant, in some cases, the conversation as related in the body of his affidavit was inconsistent with the file note, including containing significant additional information. In this regard, apparently the wrong file note was attached to the Trustee’s affidavit in support of the description given by him in the body of his affidavit of a telephone conversation with the applicant on 28 March 2018. However, that was not the only case where the file note attached to the affidavit did not support the description of the conversation as relayed in the body of the affidavit.

68    For example, at [10] of his affidavit sworn on 20 February 2023, the Trustee stated that:

On 15 January 2018 I received a telephone call from Mr Mokhtar. We had a conversation to the following effect:

He said:     My name is Ahmad Mokhtar. Alex Humphries gave me your number. I would like to ask you some questions about bankruptcy which I am thinking about.

I said:    Sure.

He said:    I went through a divorce and all I have left is a half interest in a property in St Clair where I live. I refinanced it since the divorce. I received $122,000 from my ex-wife when we settled.

I said:    What happened to the money you had?

He said:    I gave some money to my ex-brother-in-law and to other family members. Anyway, Alex said to talk to you about purchasing that interest in the property back from the bankrupt estate once I become a bankrupt.

I said:    If I become the trustee, I will have to get a number of market appraisals to determine the amount of equity first of all. In the meantime, you can get your own market appraisals. Who is the other owner?

He said:    My cousin.

I said:    An arrangement to purchase the bankrupt estate’s interest is possible where there is only limited equity in the property. However, it will become yours only after both you have paid in full with interest and are discharged. I want to stress that you have to be discharged before the interest becomes yours as that is the law due to a certain court decision. That is also the position of AFSA my regulator. Do you understand?

He said:    Yes.

I said:     I also want to stress that you must pay. While I will be patient to a point, I will pull the plug at some point in time if you don’t pay. You don’t want to end up like a particular bankrupt woman who had to pay only $5,500. She paid only $500 when I had no choice but to pull the plug as I have duties to the bankrupt estate. Her husband then had to find $165,000 from his super to save the house from sale. Extreme case but do you understand?

He said:    Yes. Alex said that I will have to pay income contributions on my income which is going to be about $140,000.

I said:    That is right. How much you pay depends on the number of dependants and how much child support you pay. It is in your interest to pay as otherwise you can get your bankruptcy extended. It is one of the two most common reasons why bankrupts get their bankruptcy extended. You would then have even more income contributions to pay. Something to be avoided at all cost.

He said:    Understood.

I said:     Tell me more about what happened to your money.

He said:    When my marriage broke up I was depressed. I gave some money to creditors. The rest I spent or gambled. I also lost the money from shares I sold. I even drew money from my super.

I said:    How did you pay your creditors?

He said:    A lot of it was in cash.

A copy of my file note of this telephone conversation is at page 2 of Exhibit SP-2.

(Emphasis omitted.)

69    However, the handwritten file note of this telephone conversation at page 2 of the exhibit simply states:

Mokhtar             15/1/18

Tel.

- Property – home ® refinance - $122K

- gave brother in law $65K?. – [indecipherable word] – preference?

- St Clair - [indecipherable word] – get [indecipherable word] appraisal

- other owner ® [indecipherable word]

- arrangement? If limited equity – pay + discharge

- [four indecipherable words]

- spent money – depressed – marriage break up – gambled shares – drew money out of super

- cus ® cash?

70    While there was no evidence as to how and when the note was made, it can reasonably be inferred from the nature of the note that it was contemporaneous. Nonetheless, the note lends no support to the detailed telephone conversation set out in the Trustee’s affidavit. To the contrary, it strongly suggests that the conversation as described in the body of the affidavit is a complete reconstruction.

71    Having regard to these concerns, I do not consider that the evidence in the body of the Trustee’s affidavit in direct speech of the alleged content of conversations can be relied upon absent corroborative evidence or admissions by Mr Mokhtar. The Trustee was unable to provide a satisfactory explanation for the inconsistencies between the content of conversations as set out in the body of his affidavits, on the one hand, and his file notes, on the other hand. In addition, in two affidavits (First Trustee Affidavit and Fourth Trustee Affidavit), the Trustee deposed to words spoken at a meeting with Mr Mokhtar on 20 March 2021. Yet the accounts of the conversation, both of which were given in direct speech, differed between the two affidavits without any explanation for the differences.

72    Furthermore, the extent to which the Trustee’s affidavits were drafted by his solicitors, as opposed to setting out his actual recollection of events in his own words, remains unclear. This is despite the Trustee’s evidence that he amended his first affidavit (First Trustee Affidavit) to accord with his recollection and “I think I had a much more direct hand” in drafting “the other affidavit” (which I take to be a reference to the Third Trustee Affidavit). As such his affidavit evidence was generally unsatisfactory.

73    Nonetheless, I found the Trustee’s evidence in cross-examination generally to be persuasive, notwithstanding that he was prone to discursive answers and was at times defensive. The latter was illustrated by the frequency with which he would answer questions about his conduct or recollection of matters by diverting the answer to Mr Mokhtar’s behaviour, which he clearly viewed extremely poorly and was very upset about. In particular, I largely accept the gist of his oral evidence as to matters conveyed in certain significant conversations including, notably, the conversation at the Top Ryde Shopping Centre.

4.4    Was there a failure to comply with the rule in Browne v Dunn with respect to the failure to cross-examine the Trustee on certain topics?

74    The respondent objected to the applicant’s submissions regarding the 17 Objection Notices on the basis the Trustee had not been cross-examined on the issue in breach of the rule in Browne v Dunn (1893) R 67. It was submitted that as a result, the Trustee was not afforded the opportunity to respond to the proposition that he acted improperly in issuing the Objection Notices from bankruptcy over an 11-month period.

75    The rule in Browne v Dunn is an aspect of the requirements of procedural fairness, namely, that there is an obligation on a party cross-examining a witness to give the witness an opportunity to explain when it is proposed that the witness’ evidence, in whole or in part, should not be believed. However, it is not necessary to afford the witness that opportunity in cross-examination where clear notice has already been given of the cross-examiner’s intention to rely on such matters.

76    In West v Mead [2003] NSWSC 161 at [95]–[99], Campbell J helpfully analysed the authorities and relevant principles as follows:

In Browne v Dunn at 70-71 Lord Herschell LC stated an obligation of procedural fairness which counsel has when cross-examining a witness who counsel intends to submit should not be accepted:

“If you intend to impeach a witness you are bound, whilst he is in the box, to give him an opportunity to make any explanation which is open to him; and, as it seems to me, that is not only a rule of professional practice in the conduct of a case, but is essential to fair play and fair dealing with witnesses.”

However, Lord Herschell LC said that there was no obligation to raise such a matter in cross-examination where it is:

“… perfectly clear that [the witness] has had full notice beforehand that there is an intention to impeach the credibility of the story which he is telling … All I am saying is that it will not do to impeach the credibility of a witness upon a matter on which he has not had any opportunity of giving an explanation by reason of there having been no suggestion whatever in the course of the case that his story is not accepted.”

In Allied Pastoral Holdings Pty Ltd v Federal Commissioner of Taxation [1983] 1 NSWLR 1 Hunt J made a thorough review of later cases applying Browne v Dunn, and concluded (at 26):

“I remain of the opinion that, unless notice has already clearly been given of the cross-examiner’s intention to rely upon such matters, it is necessary to put to an opponent’s witness in cross-examination the nature of the case upon which it is proposed to rely in contradiction of his evidence, particularly where that case relies upon inferences to be drawn from other evidence in the proceedings.”

In the present case, the serving of Ms West’s affidavit in chief gave notice to Ms Mead and her advisers that Ms West proposed to rely upon the matters contained in paragraph 181. Ms Mead took the opportunity, in her own affidavit in response, specifically to reply to that allegation. Documents exchanged between the parties to litigation before the commencement of the trial are able to give notice that a witness’s account of events will be challenged in particular ways, so that there is no breach of Browne v Dunn if the witness’ account is not challenged in cross-examination. – Marelic v Comcare (1993) 121 ALR 114 at 120 (pre trial exchange of medical reports gives adequate notice), Flower & Hart v White Industries (QLD) Pty Ltd (1999) 163 ALR 744 at [52] (statement of issues, stated case and service of documentary evidence can give adequate notice), Stern v National Australia Bank Limited (2000) 171 ALR 192 at [44] (adequate notice given by pleadings), Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 at 236 per Mahoney JA (adequate notice given by “the nature of the defendant’s case and the particulars given, and otherwise the conduct of it”), In the Marriage of L C & T C (1998) 23 FamLR 75 at [39] (affidavits give adequate notice). Cross On Evidence, 6th Australian edition, paragraph [17460] footnote 12 says:

“… the rule in Browne v Dunn did not apply where all parties were on notice of the evidentiary issues, eg by reason of affidavits having been exchanged …”

The consequence of these decisions is that the circumstances in which Browne v Dunn will require matter to be put to a witness in cross-examination will depend upon the nature of the pre-trial preparation there has been, and whether that pre-trial preparation has been sufficient to give notice to a witness of the submission ultimately intended to be put to the court. An aspect of this is that Browne v Dunn will require more extensive cross-examination in a case where all the evidence is given orally, than is necessary in a case where the substance of the evidence proposed to be given by each side is notified in advance by affidavit or statement.

Even when there has been an exchange of affidavits or statements, the rule in Browne v Dunn will require a cross-examining counsel to put to a witness the implications which counsel proposes to submit can be drawn from the evidence, if those implications are not obvious from the evidence, or from other pre-trial procedures, or the course of the case. However, the submission which Ms Bateman seeks to put on the basis of paragraph 181 of Ms West’s affidavit in chief involves no drawing together of strands of evidence to create some overall theory or inference of fact, but is a submission as to the legal consequence that should be drawn from the facts plainly asserted in paragraph 181. Nothing in the rule in Browne v Dunn prevents her from putting that submission.

(Emphasis added.)

77    Applying these principles to the present case, the Trustee was given clear notice that Mr Mokhtar alleged that he had acted improperly in issuing the 17 Objection Notices over an 11-month period. The applicant’s Concise Statement dated 23 December 2022 at [38] alleged that “the volume and frequency of the objection notices, as well as the timing of them in the life of the bankruptcy, gives rise to a legitimate concern that the notices have not been issued sensibly, and rather have been issued for vindictive purposes rather than to advance legitimate interests of the bankrupt estate.”

78    In his Concise Response dated 23 February 2023, the Trustee denied the allegations and alleged at [34]–[35] that:

The Trustee has a statutory duty to file a notice of objection to discharge whenever a bankrupt is not discharging his statutory duties. The fact that multiple notices of objection were issued in Mr Mokhtar’s case is no reason to infer that they were filed for “vindicative purposes” or to punish Mr Mokhtar.

Mr Mokhtar bears the burden of proving a case for the removal of the Trustee as mere dissatisfaction with a decision, or actions of the Trustee or mere assertions of partiality, no matter how stridently put, are not enough to justify removal.

79    In his reply, Mr Mokhtar relevantly joined issue with these contentions.

80    The allegation regarding the volume and frequency of the objection notices also formed part of the applicant’s written submissions in chief dated 14 June 2023. The Trustee further defended the filing of the objection notices in his written submissions (RS), especially at [28]–[35]. The Trustee, among other things, submitted that it was not unusual for a trustee to lodge an objection to discharge just before the bankrupt is due to be discharged. The Trustee submitted that the purpose of the objection procedure was to require the bankrupt to comply with various of his duties in circumstances where he had failed to do so. The Trustee “noted that AFSA, as the supervisory body, would have taken steps to set the objections aside had it taken the view that they were without foundation and should not have been made in that number” (RS, [34]).

81    In these circumstances, it is perfectly clear that the Trustee had full notice in advance of the trial of the applicant’s allegations concerning the number and timing of the notices of objection to discharge from bankruptcy, and the adverse inferences which he asked the Court to draw as to the Trustee’s purpose. There was no breach of the rule in Browne v Dunn in the failure by the applicant to cross-examine the Trustee as to his purposes in issuing the objections.

5.    FACTUAL FINDINGS

5.1    Pre-bankruptcy transfer of the Strauss Road Property

82    Mr Mokhtar married his former spouse on 20 December 2011. They subsequently separated and signed a Separation Agreement on 1 July 2017. The Separation Agreement (which only came to light late in June 2022, following investigations by the Trustee) contained the following schedule:

Schedule A

Ahmad Shaib Mokhtar

Ahmad Shaib Mokhtar will be entitled to the following property free of any claims by [Mr Mokhtar’s former spouse].

83    The Separation Agreement therefore provided Mr Mokhtar, among other things, with full entitlement to the property at 18 Strauss Road, St Clair (the Strauss Road property).

84    On 30 October 2017, Mr Mokhtar’s former spouse’s 50% interest in the Strauss Road property was transferred instead to Mr Mokhtar’s cousin, Nabil Mokhtar. Mr Mokhtar gave evidence that he sold 50% of the interest in the property to Nabil because he “could not service the loan” on the Strauss Road property alone. The Trustee, in turn, alleges that Mr Mokhtar “either failed to disclose, or concealed, that Mr Nabil Mokhtar should not have been on title according to the property settlement between Mr Mokhtar and his wife and how Nabil came to be on the title remains unexplained”: RS, [11].

85    The Trustee further alleges that Mr Mokhtar provided the half-interest in the Strauss Road property to Nabil without consideration. The transfer document dated 30 October 2017 discloses that Mr Mokhtar and his former spouse transferred 50% ownership in the property to Nabil for consideration of $1.00. Likewise, a document containing correspondence from Mr Mokhtar’s former spouse disclosed that Mr Mokhtar had told her “that our joint share in the Strauss Road property was to be transferred to himself and Nabil Mokhtar as joint tenants”. A later document, sent on 21 July 2022 by Mr Nicholas Seyfarth (Mr N Seyfarth), writing under the direction of Mr Mokhtar as a “lay representative”, further affirms that “Mr Nabil Mokhtar did not pay monies to acquire Ms Mokhtar’s interest in the Strauss Road property”.

86    Mr N Seyfarth was a postgraduate student, residing in London. In December 2021, he was contacted by Mr Edward Seyfarth (Mr E Seyfarth), asking if he could assist Mr Mokhtar with his communications regarding his bankruptcy. Mr E Seyfarth was a longstanding friend and neighbour of Mr Humphries. Mr E Seyfarth appears to have attended a meeting, or meetings, between Mr Humphries and Mr Mokhtar at the time the debtors petition was being prepared in January 2018. In addition, Mr E Seyfarth assisted Mr Mokhtar in seeking review of various notices of objection to discharge to bankruptcy and in these proceedings, prior to Mr Mokhtar obtaining pro bono legal representation.

87    For completeness, the transfer document between Mr Mokhtar, his former spouse and Nabil, dated 30 October 2017, was witnessed by Ms Madeleine Seyfarth. In correspondence with Mr Humphries, dated 7 August 2022, the Trustee said he presumed Ms Madeleine Seyfarth was Mr E Seyfarth’s wife and questioned their involvement with Mr Mokhtar prior to the bankruptcy. Mr Humphries did not confirm who Ms Seyfarth was and said he did not know anything about the Seyfarths’ dealings with Mr Mokhtar prior to the bankruptcy.

88    These documents only came to light late into the administration of the bankruptcy as a result of the Trustee’s investigations. As I explain shortly, one of the major contributing factors to the deterioration in the relationship between Mr Mokhtar and the Trustee was Mr Mokhtar’s lack of assistance to the Trustee in providing information about the property transfer to Nabil and the separation agreement. Mr Mokhtar’s failure to provide adequate responses to the Trustee’s inquiries resulted in the Trustee issuing notices to Mr Mokhtar’s former spouse in May 2022 under s 77A of the Bankruptcy Act for production of documents relating to a “private agreement”. A copy of the draft separation agreement was produced to the Trustee by Ms Mokhtar under cover of a letter dated 26 June 2022. Subsequently, the Trustee was provided with a copy of the signed separation agreement by George Stewart Debt Solutions (where Mr Humphries used to work) following inquiries by the Trustee with the company on 18 July 2022.

5.2    The debtor’s petition filed on 9 March 2018 and alleged concealment of assets (issue 1)

5.2.1    Events leading up to the bankruptcy

89    In late 2017, Mr Mokhtar became concerned that he was unable to manage his finances. As I have earlier found, the applicant was depressed following the breakdown of his marriage, and had serious problems with gambling, over-spending, and alcohol. I accept that these were the primary factors to which led to his financial difficulties.

90    In December 2017, Mr Mokhtar contacted Mr Alex Humphries of George Stewart Debt Solutions about his financial affairs. The Trustee was acquainted with Mr Humphries in his capacity as a “pre-insolvency advisor” and had dealt with him for approximately a decade. Mr Humphries recommended that Mr Mokhtar speak to the Trustee about declaring bankruptcy and gave him the Trustee’s contact details. Mr Moktar first contacted the Trustee in January 2018. In his first report to creditors on 14 March 2018, the Trustee disclosed that he had spoken with Mr Mokhtar prior to his declaration of bankruptcy and described what was said in those conversations as follows:

The number of meetings with the bankrupt or his advisers – none; however, on 15 January 2018 and 8 March 2018 I had a telephone conversation with Mr Mokhtar who stated that his marriage had broken down and as a result he received $122k from his ex-wife for his interest in the matrimonial home. Mr Mokhtar stated that he used that money to repay debts and otherwise he spent it freely. Mr Mokhtar stated that he also had a large parcel of Italian shares which he sold and together with money from his superannuation fund, he visited his family in Melbourne frequently and repaid debts, including family and credit cards debts, and further took to drinking heavily until the money ran out. Mr Mokhtar also stated he now lives in a property with his new partner which was purchased relatively recently and according to a bank valuation as at December 2017 there was limited equity in the property. Mr Mokhtar stated that he and his new partner wished to purchase the bankrupt estate’s interest in the property. I stated that I would first investigate the equity in the property on appointment before making any decisions. However, I said that if there was in fact limited equity in the property it may be commercial to give the opportunity to purchase the equity in the property although if Mr Mokhtar as bankrupt was the purchaser, his interest would not revest until there was payment in full and discharge from bankruptcy.

(Italics in original.)

91    I accept this as an accurate account of those conversations, given it is an essentially contemporaneous account of the conversations, transcribed well before any deterioration in the parties’ relationship. It is also apparent from this evidence that the question of Mr Mokhtar purchasing the equity in the Strauss Road property was raised before he entered into bankruptcy and was considered then to be a possible option by the Trustee.

92    The Trustee also stated in the first report that neither he nor his firm had any relationship with the bankrupt or his family in the preceding two years and that he had not given any pre-appointment advice. I accept the truth of those statements.

93    I also accept that Mr Mokhtar may not remember exactly what he was told in meetings with his financial advisor and the Trustee about his obligations. However, I do not find it credible that Mr Mokhtar was not informed about, or did not understand, his basic obligations as a bankrupt. I find that Mr Mokhtar was advised by his financial advisor, Mr Humphries, about his obligations in entering into the bankruptcy, including, importantly, to disclose all of his assets and pre-bankruptcy dealings in property. Mr Humphries signed and dated a declaration in the completed statement of financial affairs that he “carefully read to/interpreted for the person named above [Mr Mokhtar] the prescribed information and the questions on this form…”. Mr Mokhtar’s obligations were also set out in the Debtor’s Petition Prescribed Information, as part of Mr Mokhtar’s debtor’s petition. Mr Mokhtar signed an acknowledgement that he had received and read this information.

94    I also infer from the file note completed by Mr Humphries on 5 December 2017 at his meeting with Mr Mokhtar (Mr Humphries’ file note), that Mr Humphries advised Mr Mokhtar at that time of his disclosure obligations. The file note records information disclosed by Mr Mokhtar about his assets, income, creditors and prior dealings in assets. I note that this file note was produced by George Stewart Debt Solutions in response to the Trustee’s request (First Trustee Affidavit at [83]-[84]) and, in turn, by the Trustee to Mr Mokhtar in response to Mr Mokhtar’s notice to produce (Fourth Mokhtar Affidavit at [9]–[11]). It is also likely that the Trustee informed Mr Mokhtar of his basic obligations as a bankrupt from the outset, including that he was required to disclose his assets, given that the record of conversation in the Trustee’s first report to creditors indicates that the parties were proceeding (not surprisingly) on that assumption. Furthermore, Mr Mokhtar was reminded of those obligations on multiple occasions in subsequent correspondence from the Trustee.

5.2.2    The debtor’s petition and statement of affairs

95    Mr Humphries prepared the debtor’s petition and the accompanying statement of financial affairs. Mr Mokhtar signed the debtor’s petition on 9 March 2018. This was lodged with the official trustee on Mr Mokhtar’s behalf on 14 March 2018. The Trustee was appointed as official trustee of his estate on the same day. Mr Mokhtar has been a bankrupt since that date.

96    In his debtor’s petition and statement of affairs, Mr Mokhtar gave his residential address as the Strauss Road property (as he had said in his pre-bankruptcy telephone conversations with the Trustee) and his occupation as audiometrist. However, in a letter dated 21 July 2022 from Mr N Seyfarth, writing under Mr Mokhtar’s direction, to the Trustee, Mr Mokhtar advised that he had only lived at the Strauss Road property until February 2018, leaving due to depression and anxiety which were exacerbated by living alone after the breakup of his marriage. Thereafter, Mr Mokhtar said that he periodically stayed with various family members until November 2020 when he rented a property. One of the Trustee’s complaints is that Mr Mokhtar failed to notify him of his change in residence pursuant to his statutory duty under s 80 of the Bankruptcy Act.

97    In his statement of affairs, Mr Mokhtar:

(1)    listed “[e]xcessive use of credit facilities including losses on repossessions, high interest payments and pressure selling” as the main cause of his bankruptcy (Q18A) and stated that he first had difficulty paying his debts in July 2015 (Q18C);

(2)    disclosed superannuation and life insurance policies totalling $16,699.70 (Q26);

(3)    disclosed that he had received a superannuation payout on 1 April 2016 in the amount of $115,000 (Q26);

(4)    disclosed bank savings totalling $62.70 (Q23) and $213 in cash (Q22);

(5)    did not disclose any ownership or interest in a vehicle (Q27);

(6)    disclosed ownership of the Strauss Road property and advised that $530,000 had been paid to acquire the property, its estimated resale value was $730,000, and that $671,000 was owed to creditors holding security over the property (Q28);

(7)    stated that he lived at the Strauss Road property and that it was not rented to tenants (Q28);

(8)    disclosed that Nabil Mokhtar was also an owner of the Strauss Road property and gave Nabil’s address as the Strauss Road property (Q28);

(9)    disclosed the transfer of the former matrimonial home to his former spouse and the sale of shares on the Italian Stock Exchange in July 2017 for $156,000 (Q33); and

(10)    did not disclose any shares or any other assets or sources of income aside from his employment as an audiometrist.

98    In the section headed “Additional Notes”, Mr Mokhtar stated with respect points (3) and (9) above:

SOA Q26 – page 10: I was in a very difficult time with my marriage (six years) and was very depressed and my life reached a new low. I resorted to drinking and trying to escape from reality. I found myself spending money like it was going out of style and would escape down to Melbourne at every opportunity. This began to affect my work and most of all my family around me. With their help I managed to get myself back on track and regained my composure. The monies I received was spent on this low part of my life.

SOA Q33 – page 12: [redacted] [the former matrimonial home] was jointly owned by my ex spouse and myself. She bought my half of the equity for $122,922.73. At the time we had a mortgage of $865,000.00. In return I was given her share of the [Strauss Road] property … . At the time the mortgage was $672,000.00.

99    Further, while Mr Mokhtar disclosed debts owing to a number of creditors including the ATO totalling $283,895.13, he did not disclose any debts to family members. The Trustee alleges that Mr Mokhtar had multiple other creditors such as family members who he did not disclose as creditors.

100    The statement of financial affairs also discloses that Mr Humphries assisted Mr Mokhtar in completing the form, and, as earlier mentioned, Mr Mokhtar signed the acknowledgement that he had received and read the prescribed information setting out options to deal with unmanageable debt and the consequences of proceeding with the petition for bankruptcy. The latter stated, among other things, that a bankrupt “cannot conceal, remove or dispose of any property inside or outside Australia” and advised that a bankrupt may be required to make contributions from their income. Mr Mokhtar also signed the declaration at the end of the form that the particulars set out in the statement were correct.

5.2.3    Did Mr Mokhtar conceal information about his assets and liabilities?

101    A central issue between the parties was the Trustee’s allegation that Mr Mokhtar had deliberately concealed certain information about his assets and liabilities in his debtor’s petition. It is important to bear in mind that this case is not an inquiry into the bankruptcy; nor is this a criminal prosecution (where the standard of proof is beyond reasonable doubt). Nonetheless the question of Mr Mokhtar’s conduct in the course of the bankruptcy is relevant because the Trustee relies upon Mr Mokhtar’s conduct in support of his submissions that:

(1)    the Trustee’s conduct in issuing the 3 May letter and the Objection Notices was “diligent and aimed at carrying out his duties independently”;

(2)    the “degree of antagonism” arising between the Trustee and the bankrupt was a result of Mr Mokhtar’s lack of cooperation; and

(3)    Mr Mokhtar “should not be allowed, through his own conduct, to attempt to generate and then rely upon a suggested reason for removal of Mr Piscopo.”

102    Mr Mokhtar, however, gave evidence that he provided all relevant information to his financial advisor and the Trustee for the preparation of the debtor’s petition and the statement of affairs. He gave further evidence that he did not read the documents before signing because he relied upon his financial adviser and the Trustee to have included all of the relevant information.

103    The Trustee alleged in the First Trustee Affidavit at [89]–[92] (being paragraphs which were not read but received only as submissions) that Mr Mokhtar failed to disclose the following matters in his statement of affairs:

(1)    he directed his [former spouse] to transfer her interest in the Strauss Road property to his cousin Mr Nabil Mokhtar without consideration which was contrary to the terms of the property settlement agreement [with his former spouse], something which should have been disclosed in answer to questions 33 to 35 of his statement of affairs…;

(2)    in the months before his bankruptcy, Mr Mokhtar refinanced the mortgage over the Strauss Road property and received $57,922.72 to dilute the equity in the property, something which should have been disclosed in answer to question 39 of his statement of affairs…;

(3)    …shortly before the bankruptcy Mr Mokhtar owned or disposed of his motor vehicle (valued at $20,000 in the separation agreement…) to his cousin Mr Nabil Mokhtar possibly for undervalue, something which should have been disclosed in answer to questions 33 to 35 of his statement of affairs…;

(4)    Mr Mokhtar owned employee stock options that vested in his bankrupt estate [and] Mr Mokhtar exercised them four months into his bankruptcy and received $81,513.97 without accounting for the sale to his bankrupt estate whose money it was; and

(5)    Mr Mokhtar had made preferential payments to multiple family members and friends….

104    Further, the Trustee alleged that Mr Mokhtar had failed to disclose rental income received by him from the Strauss Road property which the Trustee only found out about when the ATO provided him with Mr Mokhtar’s 2019 and 2020 income tax returns.

105    First, as to (1), it will be recalled that Mr Mokhtar disclosed that Nabil was also an owner of the Strauss Road property and gave Nabil’s address as the Strauss Road property in his statement of affairs. Further, additional notes to Mr Mokhtar’s statement of affairs disclosed that he had been given his wife’s share of the property as part of the Settlement Agreement between them.

106    These disclosures plainly raised the question as to how Nabil came to acquire his interest in the property. The statement of affairs did not disclose that information despite the fact that the form required disclosure of the sale, transfer or gift of any assets worth more than $1000 in the last 5 years. Nor is there any evidence to suggest that Mr Mokhtar gave this information to Mr Humphries.

107    That information and, in particular, the fact that Nabil had purchased his interest for peppercorn consideration, came to light only as a result of the Trustee’s investigations. Mr Mokhtar’s failure to explain the transfer and produce relevant documents, including the separation agreement, was a longstanding issue which contributed to the deterioration of the relationship between Mr Mokhtar and the Trustee. It was at the heart of several of the notices of objection issued by the Trustee.

108    Secondly, as to the allegation in (2), on 29 June 2022 Mr Mokhtar wrote to the Official Receiver seeking to amend his statement of affairs: R5 at 361–2. In that letter, Mr Mokhtar said that, upon reviewing the draft separation agreement against the statement of affairs, he had come across “an anomaly”. Thus, while the statement of affairs referred to his wife purchasing his half share in the matrimonial property for $122,922.73, the separation agreement referred to Mr Mokhtar’s former spouse transferring her legal interest in the matrimonial home to Mr Mokhtar in the sum of $65,000 only. In the letter, Mr Mokhtar admitted that “The balance $57,922.73 [being the difference between these amounts] is a payment which was paid into my ex-wife’s bank account which in fact should have been made to my bank following the refinancing of the investment (Strauss Road) property.”

109    As such, the refinancing was admitted by Mr Mokhtar but had not been disclosed to the Trustee in the statement of affairs. Mr Mokhtar disclosed the refinancing only after the draft separation agreement had been located and provided to the Trustee by Mr Mokhtar’s former spouse under cover of a letter dated 26 June 2022.

110    Thirdly, as to (3), Mr Mokhtar’s ownership of a 2007 BMW 335i is listed in Mr Humphries file note under the heading “car”, and is estimated to be worth between “$15–18k”. I accept Mr Mokhtar’s evidence that this was the vehicle which he owned at the time of his separation but was later sold to Nabil. However, the documentation provided by Transport NSW on 1 March 2022, in response to a request by the Trustee, indicates that Mr Mokhtar sold the BMW on 16 December 2017. It is no doubt for this reason that Mr Mokhtar represented that he did not have a vehicle in his debtor’s petition.

111    Further, the documentation from Transport NSW stated that the car was transferred with a seller declared value of $32,000.00 and a buyer declared value of $31,000.00. The car was, however, valued at $20,000 in the separation agreement. Given these estimates of the value of the car including at the point of sale, Mr Mokhtar’s evidence in cross-examination, that he only sold the car to Nabil for around $7000.00 because there was a problem with the gearbox, was not convincing. However, there is no need for me to determine the truth of that evidence. It suffices for present purposes that the evidence establishes that sale of the car was not disclosed in Mr Mokhtar’s statement of affairs despite the requirement for Mr Mokhtar to disclose the sale of any assets worth more than $1000 in the previous 5 years.

112    Fourthly, with respect to (4), Mr Humphries wrote the number “217500” in his file note under the heading “ASSETTS[sic]/INVESTMENTS /SHARES”. Mr Mokhtar contended in re-examination, and I accept, that this was a reference to the number of company shares which he owned at that time and disclosed to Mr Humphries. In addition, at the bottom of the document, a notation provides that “156k shares sold – July 2017”. In this regard, it will be recalled that Mr Mokhtar’s statement of affairs, which accompanied his petition, referred to a series of shareholdings sold prior to the bankruptcy.

113    It can, therefore, reasonably be inferred from the file note that, at his meeting with Mr Humphries in December 2017, Mr Mokhtar did in fact disclose to Mr Humphries the existence of his share holding, as well as the sale of the other shares. It follows, contrary to the respondent’s submissions, that I do not accept that Mr Mokhtar deliberately concealed information from Mr Humphries about his ownership of certain shares. On that basis, I also infer that Mr Mokhtar did not intend to conceal the existence of those shares from the Trustee but rather expected that they would be included in his statement of affairs, which he thought would be prepared by Mr Humphries.

114    However, Mr Mokhtar received $81,513.97 into his AMP deposit account on 24 July 2018, after he exercised the Amplifon employee stock options. This was some four and a half months after he entered into bankruptcy. Mr Mokhtar agreed in cross-examination that he did not disclose the receipt of those funds to the Trustee and accepted that the Trustee found out about the receipt of those funds only after he obtained the statement for Mr Mokhtar’s AMP deposit account. Mr Mokhtar’s explanation for not disclosing the funds to the Trustee was “Because this was my – my – part of my income. This was my money.” Mr Mokhtar further gave evidence he never knew that he had to declare the money. This reflects, at best, a complete lack of appreciation of his obligations as a bankrupt, as does his explanation for what occurred to that money – namely, that he gambled the money away. At worst, it was a deliberate lie in an attempt to defect or minimise responsibility for his conduct.

115    In the fifth place as to (5), the Trustee gave evidence that in 2020 he sought to recover preferential payments of money made by Mr Mokhtar to a friend and two cousins but, despite successfully reaching agreements with them, they all “reneged”: First Trustee Affidavit at [36]. However, the evidence on which the Trustee relied in support of this contention went no higher than this and is insufficient for me to make any findings with respect to this allegation, save to note that the issue appears to have been another contributing factor to the breakdown in the relationship between Mr Mokhtar and the Trustee.

116    Sixthly, as to (6) above, the evidence does not establish that, on the balance of probabilities, there was rental income for Mr Mokhtar to disclose from the Strauss Road property at the time that he signed the debtor’s petition and statement of affairs.

117    On 2 June 2022, the Trustee issued a demand for books of associated entity to Mr Mokhtar seeking all residential tenancy agreements entered into since March 2018 regarding the Strauss Road property and documents showing the rent collected by Mr Mokhtar from the tenants. Attached to that demand was relevantly the front page of a residential tenancy agreement dated 8 December 2020 between Nabil, purportedly as landlord of the Strauss Road property, and third parties, as tenants. At trial, counsel for the Trustee submitted that “the turning point” in his relationship with Mr Mokhtar “was when [the Trustee] saw the property was being rented”.

118    I accept the Trustee’s evidence that he became aware of the fact that Mr Mokhtar received rental income in the financial year ending 2019 of $19,040.00 (gross) and the financial year ending 2020 of $22,012.00 (gross) through a document that the Trustee obtained from the Australian Taxation Office on 2 November 2022 about Mr Mokhtar’s tax affairs.

119    However, I am satisfied on the evidence that no lease had been entered into with respect to the Strauss Road property at the time when Mr Mokhtar entered into bankruptcy. Rather, a lease was entered into without the Trustee’s knowledge and permission, at some time during the 2018/2019 financial year.

120    In cross-examination, Mr Mokhtar variously claimed that all of the rental income went to Nabil, the rental income may have appeared in his tax return by mistake, and the Trustee was aware of the rental income. It is clear from these inconsistent statements that Mr Mokhtar could not give a satisfactory reason for why the income was not disclosed to the Trustee despite the income and associated deductions being claimed in his tax returns. I do not accept his evidence as credible or reliable. Nor do I consider that Mr Mokhtar gave a satisfactory explanation for why he was not a party to the lease in saying that “Nabil … took over the lease for me. It was just too much – too much – I had too much on my mind…”. The more likely explanation as to why Mr Mokhtar was not a party to the lease is that he could not be because his interest in the Strauss Road property had vested in the Trustee, who was ignorant of the lease.

121    It follows that there were a number of material omissions from the information provided by Mr Mokhtar in his statement of affairs, as well as a number of transactions which occurred later in respect of property, which the evidence establishes were not disclosed to the Trustee by Mr Mokhtar.

122    I accept, however, that the applicant’s evidence is credible as to his belief that both his financial advisor and the Trustee were advising him and assisting him in the preparation of the debtor’s petition and statement of affairs. I also accept that Mr Mokhtar may have been confused about, or did not fully understand, the individual roles of his financial advisor and the Trustee with regard to his bankruptcy. I accept that he believed at the time of filing his debtor’s petition that they each had a role to play in the preparation of the debtor’s petition and statement of affairs. That said, as I have earlier held, there is no doubt that Mr Mokhtar’s financial advisor and the Trustee would have informed him of the essential nature of his responsibilities of disclosure. Indeed, in his evidence about the first meeting with Mr Humphries in December 2017, Mr Mokhtar acknowledged that “obviously, I had to declare” in the context of explaining that the financial position statement recorded information provided by him to Mr Humphries.

123    Mr Mokhtar also repeatedly sought to justify his failure to read the statement of affairs due to mental health issues at the time. As I have earlier found, I accept that he was under a lot of stress given the breakdown in his marriage, his financial situation, his alcohol abuse, and his gambling problems. I also accept that he was experiencing mental health issues. Furthermore, Mr Mokhtar was still functioning at work as an audiometrist, as he agreed in cross examination. I do not therefore accept that he was incapable of understanding his responsibilities as a bankrupt, that he did not understand that he was required to confirm the accuracy of the information contained in the declaration at the end of the statement of affairs by signing it, or that he would have been incapable of comprehending the information contained in the statement of affairs, if he had taken the trouble to read it properly.

124    Save for the existence of the shares still owned by Mr Mokhtar when he filed for bankruptcy, there is no evidence corroborating Mr Mokhtar’s evidence that he disclosed everything to Mr Humphries. Mr Mokhtar repeatedly sought to blame Mr Humphries and the Trustee for issues that arose during the bankruptcy, including omissions from the debtor’s petition and statement of affairs. Notwithstanding his confusion as to the role of Mr Humphries and the Trustee, it was Mr Mokhtar’s responsibility to ensure his debtor’s petition was accurate. By his own admission, Mr Mokhtar did not do so. Any responsibility for the failure to check those documents is his and his alone. Mr Mokhtar’s attempts to shift responsibility to Mr Humphries and the Trustee for the omissions from his statement of affairs, on the basis that he relied on them to include all of the information he disclosed cannot be accepted as a justification for their omission, even if his evidence in this regard is believed. It follows, at the very least, that Mr Mokhtar exhibited a cavalier approach to completion of the statement of affairs contrary to his responsibilities under the Bankruptcy Act and the declaration which he signed in the statement of affairs, even if he did not intend deliberately to conceal those assets and prior transactions.

5.3    April 2018: The Trustee’s first report to creditors and the reassessment of income contributions

125    On 10 April 2018, the Trustee issued a report to creditors. In this report, the Trustee estimated his remuneration for administration of the estate would be $17,180.00 plus GST and disbursements. He stated that “[t]o the extent that there are insufficient funds recovered from the estate to pay my remuneration, it will be written off”: Piscopo affidavit sworn 20 February 2023 at [17] and Exhibit R5 at 60-78. The Trustee submits that this was stating the usual position with respect to bankruptcies in the absence of creditor funding (RS at [12]).

126    On 20 April 2018, the Trustee wrote to Mr Mokhtar advising that his income contributions liability for CAP 1 had been reassessed pursuant to s 139W(2) of the Bankruptcy Act in the following terms:

CAP 1 liability    10,814.37

Less paid            0

Balance payable    10,814.37

The assessment for CAP 1 is provisional and will be reviewed at the end of the year.

You are required to make either 11 monthly payments of $989.12 or 24 fortnightly payments of $450.60.

127    The letter provided details for the payments to be made and advised Mr Mokhtar that he had the right to apply to the Inspector-General for an internal review of the assessment. Attached to the letter was the Notice of Contribution Assessment which contained details of the assessment based on the total income as advised by Mr Mokhtar in the amount of $140,000.00.

128    It was not in dispute that the letter accurately recorded that no income contributions had been made by Mr Mokhtar as at the date of the letter.

5.4    Entry into the agreement on 11 January 2019, with respect to the Strauss Road property

129    As earlier stated, in his statement of affairs, Mr Mokhtar stated that the estimated resale value of the Strauss Road property was $730,000. In June 2018, the Trustee obtained three market appraisals for the Strauss Road property. These respectively estimated the value of the property at between $700,000.00–$730,000.00, $750,000.00–$800,000.00, and $690,000.00–$870,000.00. Given the wide range of values, a fourth valuation was obtained by the Trustee, which valued the property at $710,000.00.

130    In or about September 2018, Mr Mokhtar and the Trustee discussed the possibility of Mr Mokhtar purchasing the bankrupt estate’s interest in the Strauss Road property.

131    On 12 October 2018, the Trustee provided Mr Mokhtar with a letter enclosing a draft property agreement relating to the Strauss Road Property. On 11 January 2019, Mr Mokhtar signed the property agreement with the Trustee relating to the Strauss Road property (the Property Agreement), which provided that Mr Mokhtar would purchase the Trustee’s equity in the Strauss Road property from the bankrupt estate for $12,000.00 plus accruing interest pursuant to the terms of that agreement. The agreement stated that the Trustee’s “practical concern in Land is that he obtain for the bankrupt estate the value of the Equity plus accruing interest pursuant the terms of this agreement (“the Value”) after accounting for priority encumbrances.”

132    The agreement set out a payment schedule for regular payments of $100.00 each week commencing 21 January 2019 and for interest payments of $100.00 to be paid every week after $12,000.00 is paid until the interest was paid in full. The agreement also provided that time was of the essence for each regular and interest payment by each payment date. The Trustee retained an equitable right in the property until the value was paid in full and had a discretion to consent to the mortgage of the land. Each party acknowledged that they had the opportunity to obtain independent legal advice and to ask questions of the Trustee before execution of the agreement.

5.5    Filing of the first notice of objection to discharge from bankruptcy on 19 January 2021

133    On 28 July 2020, the Trustee also reminded Mr Mokhtar among other things that a consequence of him falling behind in his income contribution payments was potentially an extension of his bankruptcy by a further five years. On 30 July 2020, the Trustee followed up with an email to Mr Mokhtar providing a summary of the payments made by him in relation to the Property Agreement and income contribution payments.

134    By 14 March 2021, Mr Mokhtar would have been discharged from bankruptcy by virtue of the default 3-year statutory time period: s 149(1)(b) of the Bankruptcy Act. Mr Mokhtar said that he had expected his bankruptcy to last until around 14 March 2021. However, the Trustee contended that Mr Mokhtar’s expectations were misplaced as he received repeated warnings in writing and verbally that his bankruptcy could be extended to 8 years (see First Trustee Affidavit at [14], [16] and [18]) and yet still failed to pay his income contributions (RS) at [10]).

135    Shortly before the end of the default three-year statutory time period, on 19 January 2021 the Trustee filed a notice of objection to discharge from bankruptcy on the basis that Mr Mokhtar’s income contributions were $32,372.71 in arrears. In cross-examination, Mr Mokhtar accepted that he had failed to pay the income contributions which formed the basis of the first objection notice. The effect of that objection was (as stated in the notice) to extend the bankruptcy to the expected date of discharge of 15 March 2026, being the 8-year statutory maximum: s 149 of the Bankruptcy Act. The grounds for filing the objection were as follows:

Paragraph 149D(1)f of the Act:

The bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG

Evidence

On 20 May 2020 Mr Mokhtar was assessed or reassessed as being liable to pay income contributions as follows:

Year 1: $13,421.98

Year 2: $16,395.36

Year 3: $13,424.27

Total: $43,241.61

At the time, the total paid was $9,9093.90[sic]. As of 19 January 2021, the total paid is $10,868.90 leaving an outstanding balance of $32,372.71.

Mr Mokhtar was reminded a number of times about the increasing arrears and the consequences of failing to pay, the last time being by email on 26 November 2020. There was one payment of $250.00 since that time.

136    However, the objection was withdrawn on 2 May 2022. By this time, several other notices of objection to discharge from bankruptcy had been filed, as I later explain.

5.6    The meeting at the Top Ryde Shopping Centre on 20 March 2021 (issue 2)

137    On 20 March 2021, Mr Mokhtar, accompanied by a woman described as his friend, and the Trustee, with his associate, met at the Top Ryde Shopping. Shortly thereafter on 21 March 2021, the Trustee emailed Mr Mokhtar links to potential lenders for people in his situation.

138    It was common ground that the purpose of the meeting on 20 March 2021 was to discuss a pathway for Mr Mokhtar to be discharged from bankruptcy. The parties also agreed that the possible sale and refinancing of the Strauss Road property was discussed. However, the contents of the discussion are disputed between the parties. The effect of this conversation was, in Mr Mokhtar’s view, that he could sell the Strauss Road property and use the proceeds to pay out his income contributions so that he could be released from bankruptcy. The Trustee, however, staunchly denied that he had approved any such course of action.

139    The Trustee provided a vivid account of the meeting at Top Ryde Shopping Centre and its surrounding circumstances in the First Trustee Affidavit and in his oral evidence. As I have earlier found, the Trustee’s affidavit contained direct speech on this matter and is to be treated with caution. However, I found the Trustee’s evidence in cross-examination to be generally persuasive on this matter.

140    The Trustee explained that he remembered the meeting clearly because he was en route to spend time at the Blue Mountains with his associate when they stopped for the meeting. He also said that he discussed the meeting with his associate in detail afterwards, with his associate repeatedly telling him that she had a bad feeling about Mr Mokhtar and did not think he could be trusted.

141    The Trustee’s position was that he needed to get the best outcome for the creditors in the circumstances. He was following economic predictions that property prices in Sydney would collapse by mid-2021 and thought that the value of the Strauss Road property would soon fall. The Trustee gave evidence that, at the time, he understood a sale of the property was not a viable option because Nabil was not interested in selling and obtaining Court orders to enable a forced sale to proceed would cost approximately $200,000.00. A forced sale was therefore not, in is view at the time, a viable option.

142    In these circumstances, the Trustee said he took what he regarded to be an exceptional step and not something he had offered before in any other bankruptcy. The Trustee offered to Mr Mokhtar the option of Mr Moktar refinancing his equity in the property and being discharged from the bankruptcy for an agreed sum representing the value of the refinanced equity. The Trustee regarded this as a commercial settlement which would at least enable some moneys to flow through to the creditors. In essence, the Trustee’s evidence was that, while less than ideal, in the prevailing economic conditions and uncertainty introduced by the COVID-19 pandemic, the recovery of at least some money was better than none.

143    On the other hand, the Trustee considered, at the time, that if the property was sold, half of the proceeds of the sale would have to go to the bankrupt estate. He said that any other outcome would be inconsistent with his duties as a trustee to act in the best interests of the creditors. That was plainly correct. If Mr Mokhtar’s equity in the property was sold, the Trustee should receive the value of that equity in the property whether that was $50,000.00 or $100,000.00, or some other amount, provided that it did not exceed the amount owing to creditors because that is what his duties to the creditors would require.

144    I accept that the Trustee explained the gist of this to Mr Mokhtar at the meeting. However, I consider that Mr Mokhtar either misunderstood what he was being told, or alternatively, over time, reinterpreted it to convey the result that he wanted – that he could personally sell the property. In effect, there was a fundamental disconnect between the understanding of Mr Mokhtar and that of the Trustee. This misinterpretation led to a more significant misunderstanding as to the import of the 3 May 2021 letter, which in Mr Mokhtar’s submission, precipitated the breakdown in the relationship between him and the Trustee.

5.7    The Trustee’s letter of 3 May 2021 (issue 3)

145    On 3 May 2021, Mr Mokhtar telephoned the Trustee asking if he could provide a figure to give to the bank in his application for refinance. The Trustee immediately sent Mr Mokhtar the following email:

Hi Ahmad.

I have given you a calculator to work out how much is required to pay out your bankruptcy.

It changes on a daily basis. For that reason, you have to enter the day of final payment into the orange cell. The calculator will then calculate how much is required.

Please get back to me with any questions.

…

146    The attached excel spreadsheet titled “Payout figure for Bankruptcy” included various payout figures and stated the “total payable” amount to be $65,598.55. The Trustee described this as a pro forma calculator which he had given many times before to bankrupts whose bankruptcy had been extended to calculate income contributions payable. He explained in his evidence that income contributions payable change daily because the income contributions in the year of discharge are payable on a pro rata basis. He further explained that, in this case, the calculator included additional items requested by Mr Mokhtar. I accept the trustee’s evidence about the calculator.

147    Later that day, the Trustee received another telephone call from Mr Mokhtar requesting a letter to give to the bank as his broker was having problems convincing the bank that the Trustee had authorised the refinancing. As a result, the Trustee sent Mr Mokhtar an email with the subject heading “Your estate”. The email stated, “[h]ere is a letter you can give to the bank” and attached the 3 May Letter addressed “To whom it may concern”. The letter provided:

Dear Sir/Madam

Ahmad Shaib Mokhtar

NSW 931/18/5

I am Trustee of the bankrupt estate of Ahmad Shaib Mokhtar. I attach a copy of certificate of appointment.

The bankrupt estate has an interest in the property at 18 Strauss Road, St Clair NSW 2759 (the “Property”). That interest is secured by a caveat on title.

The other party with an interest in the Property is a certain Nabil Mokhtar.

As Trustee, I have the power to discharge A S Mokhtar from bankruptcy.

I will discharge A S Mokhtar from bankruptcy on the payment of approximately $66,000.00 to the bankrupt estate.

A S Mokhtar has requested my permission to refinance the mortgage over the Property in order to raise the funds for his discharge from bankruptcy.

I hereby grant A S Mokhtar permission to refinance the mortgage over the Property in order to secure his discharge from bankruptcy, provided approximately $66,000.00 is paid to the bankrupt estate at the time of settlement.

Simultaneously on payment, I will discharge A S Mokhtar from bankruptcy and remove the caveat on title.

The exact amount required for discharge will be confirmed once a date is fixed for settlement.

Please do not hesitate to contact me with any questions.

(Emphasis in original).

148    The letter was signed personally by the Trustee.

149    In his evidence, Mr Mokhtar claimed that the 3 May letter “literally deceived” him into thinking that if he paid the Trustee $66,000.00, either by selling or refinancing the property, he would be discharged from bankruptcy. He said he could not understand why, when the Strauss Road property was in fact sold and the estate received $126,000.00 from the sale (as I shortly explain), he was not discharged from bankruptcy. This, together with the objection notices filed by the Trustee commencing in December 2021, was said by Mr Mokhtar to have “made my life miserable and hell, and I just – we – I just completely lost trust in him”.

150    In this regard, the applicant submitted that:

It cannot be surprising that Mr Mokhtar was “perplexed” when the Property eventually sold, and more than $66k was directed to the Trustee, who declined to discharge him. That conclusion can be reached without there being any suggestion of impropriety or misconduct on the part of either protagonist. Even if the Trustee intended the May Letter to be strictly for the purposes of a refinancing, the possibility of confusion or misunderstanding is patent in circumstances where several persons were communicating (not always directly with each other), language and communication issues could have been a factor, and intentions may have been misunderstood.

(Applicant’s closing submissions (ACS) at [56].)

151    Prior to the 3 May letter and sale of the Strauss Road property, Mr Mokhtar said that he and the Trustee had had “a very good relationship from the beginning”. The applicant therefore submitted that the 3 May letter was the turning point in the relationship between him and the Trustee. He further submitted that it was his complaint to AFSA about being misled by the 3 May letter which prompted the Trustee to file multiple frequent objection notices, given that before then the bankruptcy had been largely unremarkable with the Trustee taking relatively limited investigatory steps: ACS at [24](3).

152    The Trustee, however, was emphatic in his evidence that the 3 May letter was intended to assist Mr Mokhtar in refinancing the Strauss Road property and nothing more. I accept that this was the Trustee’s intention. As I earlier explained, there were good reasons why the Trustee drew a distinction between a sale and refinancing of the property. He could not consistently with his duties as trustee agree that the payment of $66,000, if obtained from a sale of the property to a third party, would necessarily suffice to discharge the bankruptcy. It is important to bear in mind that that sum would have fallen far short of providing a dollar-for-dollar return to the creditors on the monies owed them and proved in the bankruptcy.

153    However, I also accept that Mr Mokhtar genuinely misunderstood the purpose of the calculator and letter and thought that they stated the amount that he needed to pay to get out of bankruptcy. Specifically, in my view, Mr Mokhtar genuinely read the calculator, it accompanying email, and the 3 May letter together as conveying that $66,000 payment would suffice for him to be discharged from bankruptcy, irrespective of whether that money came from a successful refinancing of Mr Mokhtar’s equity in the property, or from the sale of the property. As Mr Mokhtar said in his evidence, he could not understand why the source of the $66,000 should make any difference to the question of whether he was discharged from bankruptcy. In reaching this view, I have given particular weight to the fact that the calculator and accompanying email were addressed directly to Mr Mokhtar and not to the bank, and that the email simply stated, “I have given you a calculator to work out how much is required to pay out your bankruptcy”. The calculator also stated in unqualified terms: “Payout figure for Bankruptcy”.

154    Mr Mokhtar’s misunderstanding is also reflected in correspondence from Mr Mokhtar to the Trustee on 29 November 2021 in which Mr Mokhtar expressed his confusion at not being released from bankruptcy on receipt of the proceeds of sale from the Strauss Road property, and his feelings that he is being unjustly treated. In that email, he wrote:

I refer to Exhibit 1 [the 3 May letter] above attached whereby you made it very clear that should I refinance and pay you the sum of approximately $66,000.00 you would immediately release me from bankruptcy.

I further refer to Exhibit 2 [the second letter of 3 May] above and attached Calculator that you sent with calculations consistent with what you previously stated in Exhibit 1.

It was clear to me that upon payment of approximately $66,000.00 plus accruing interest you would remove me from bankruptcy. Admittedly, that was in May 2021. I am therefore perplexed as how when the unrelated party to bankruptcy decided to sell the house you compulsorily received all of my share which amounted to well over $126,000 more than double the amount requested 4 months earlier. As there was no material change between May 2021 & October 2021 I am at a total loss as to why:

1.    I have not been released from bankruptcy.

2.    If your offer of $66,000 plus accruing Interest [sic] was paid upon settlement of the Sale of the property, why have I not received any surplus funds?

3.    And even ignoring the question of “surplus funds” above. Why have I not been released from Bankruptcy? And why are you threatening me with garnishing my salary?

I am perplexed Sam….

(Emphasis omitted.)

155    Furthermore, in my view, Mr Mokhtar’s understanding of the correspondence on 3 May 2021, including the calculator, was not unreasonable given in particular the unqualified terms in which the heading to the calculator and accompanying email were expressed. I note that this view accords with that reached by AFSA in its decision of 27 May 2022 on Mr Mokhtar’s complaint of 30 November 2021. This included a complaint that Mr Mokhtar believed that the Trustee had misled him by the Trustee’s representation in the 3 May 2021 letter that, if the sum of $66,000 was received by the bankrupt estate, the Trustee would release Mr Mokhtar from bankruptcy. Specifically, AFSA found that:

on a plain reading of the letter of 3 May 2021, it is not unreasonable for you to assume that the amount of $66,000 would discharge you from bankruptcy. In addition, while the individual elements of calculator related to liabilities incurred since the bankruptcy, the title of the spreadsheet ‘payout figure for bankruptcy’ is misleading.

In the circumstances, I find the Trustee’s correspondence of 3 May 2021 and the calculator omit key information required by a user of the communication to make a fully informed decision. As such I have found that this communication with you has not met the standards and those set out in rule 42-15(2) of the Rules. I therefore have found the complaint on this ground to be justified.

5.8    Termination of the Property Agreement by the Trustee on 21 July 2021

156    On 23 June 2021, Nabil emailed a letter from him to the Trustee dated 8 June 2021, which stated:

…

From information provided, you will discharge AS Mokhtar from bankruptcy on the payment of approximately $66,000 to the bankrupt estate.

You have also mentioned that you will be providing Ahmad Shaib Mokhtar with a discount on his income contribution. We request the offer of $55,000 be accepted.

We have requested for your permission to refinance/ sale of the Property in order to raise the funds for his discharge from bankruptcy.

Once the mortgage is refinanced or property is sold the amount $55,000 will be paid to the bankrupt estate at the time of settlement.

Simultaneously on payment, you will discharge AS Mokhtar from bankruptcy and remove the caveat on title.

The exact amount required for discharge will be confirmed once a date is fixed for settlement.

157    On 7 July 2021, the Trustee advised Mr Mokhtar that he had rejected the offer of $55,000 to effect Mr Mokhtar’s discharge.

158    On 21 July 2021, the Trustee wrote to Mr Mokhtar stating that he was terminating the Property Agreement because Mr Mokhtar was “nearly $10,000 in arrears. The last payment was over one year ago”. The $3,100.00 already paid by Mr Mokhtar pursuant to the Property Agreement would be credited against his outstanding income contributions liability.

5.9    Sale of the Strauss Road Property on 3 November 2021 and receipt by the bankrupt estate of $125,281.67

159    On 24 September 2021, the Trustee received an email from Mr David Sharrock of Perpetual Conveyancing advising him that Mr Mokhtar and Nabil intended to sell the Strauss Road property. The letter read:

…

We confirm we act for Ahmad Mokhtar and Nabil Mokhtar in relation to their sale of 18 Strauss Road, St Clair.

We note you have a caveat registered on title in relation to Ahmed Mokhtar.

We confirm completion of this matter is due 3 November, 2021.

Please provide our office with an updated payout figure for the date of completion and account details for the settlement amount.

Please also advise your legal representative to be invited into the PEXA settlement workspace to have the caveat withdraw on completion.

…

160    I accept the Trustee’s evidence that he was surprised by the correspondence as he had neither authorised, nor been aware of, the sale or that the property had been put up for sale. Nonetheless, following correspondence with the real estate agents, on 24 September 2021 the Trustee approved the sale of the property in the following terms:

Dear David and Angelo,    

I confirm that I am trustee of the bankrupt estate of Ahmad Mokhtar. I attach a copy of my certificate of appointment.

I confirm that the bankrupt estate has a half interest in the property which is protected by my caveat.

I was not aware that the property had actually been put on the market for sale although there was talk of it