Federal Court of Australia

GO Markets Pty Ltd v Gupta [2025] FCA 554

ORDERS

THE COURT ORDERS THAT:

1.    The applicant be granted leave to continue this proceeding against the first and second respondents pursuant to s 58(3)(b) of the Bankruptcy Act 1966 (Cth).

2.    The respondents pay the applicant’s costs of this application.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

Introduction

1    Mr Asheish Gupta, the first respondent, voluntarily declared bankruptcy in March 2025. (His wife, Mrs Kanika Gupta, is in this proceeding the second respondent.)

2    On 17 March 2025, Mr Andrew Aravanis and Mr Alexander David Clarke were appointed as joint and several trustees of Mr Gupta’s bankrupt estate. By operation of s 58(3) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), no fresh steps can be taken in this proceeding without leave of the court.

3    The applicant, GO Markets Pty Ltd (GO Markets), wishes to take fresh steps in this proceeding, including by seeking leave to:

(a)    compel Mr and Mrs Gupta to comply with the ancillary orders dated 20 December 2024, requiring the respondents to produce bank statements for all bank accounts in their sole and joint names from January 2019 to present;

(b)    compel Mrs Gupta to produce an affidavit setting out all of her assets in Australia and giving their value, location and details, as required by paragraph 8 of the freezing orders dated 20 December 2024; and

(c)    issue subpoenas to third parties, including the respondents’ banks and also IBM Australia Limited (formerly Soft Layer) (IBM), Link11 GmBH (Link11) and DOSArrest Internet Security Ltd (DOSArrest).

4    At the hearing yesterday, Mr S L Jenkins of counsel made submissions on behalf of the applicant and read the affidavit of his instructor, Ms Jennifer Winckworth affirmed 7 May 2025, deposing to the notification of the first respondent’s bankruptcy, the appointment of trustees and the various attempts made by GO Markets to obtain documents from third parties that it believes may have been involved in secret commission arrangements with Mr Gupta. The respondents did not appear. Mr C Brown, a solicitor of Bridges Lawyers, appeared on behalf of the trustees. At the outset, Mr Brown said that the trustees neither consented to nor opposed the application.

5    Mr Jenkins also relied on his (very helpful and admirably concise) written submissions and made oral submissions in support of the application. Having considered them, I granted the leave sought. These are my reasons.

The proceeding

6    This proceeding was commenced by GO Markets on 10 December 2024, via an urgent application for ex parte freezing and ancillary orders pursuant to rr 7.32 and 7.33 of the Federal Court Rules 2011 (Cth).

7    Between 1 June 2016 and 31 October 2023, Mr Gupta was an employee of GO Markets. From around 14 April 2021 until his resignation on 31 October 2023, he was GO Market’s chief information officer.

8    In that role, Mr Gupta was GO Markets’ most senior employee in relation to information and computer technology, and was the company’s most senior representative in relation to dealings with third party IT service providers.

9    During his employment, Mr Gupta was responsible for GO Markets’ contracts with most of its IT service providers, which included engaging, negotiating and managing such contracts, including with:

(a)    Gigabit Hosting Sdn Bhd (Gigabit), which GO Markets paid approximately $3,890,598.81 for services during Mr Gupta’s employment;

(b)    IBM, which GO Markets paid approximately $4,225,146.20 for services during Mr Gupta’s employment; and

(c)    Link11 and DOSArrest, which GO Markets paid approximately $1,665,205.45 for services during Mr Gupta’s employment.

10    GO Markets alleges that, in around October 2018, Mr Gupta entered into a secret commission arrangement with Gigabit. Pursuant to that arrangement, it is alleged that Gigabit paid Mr Gupta about USD $1,116,226.79 in secret commissions. The payments were made between 15 January 2019 and 2 April 2024.

11    GO Markets also alleges that Mr Gupta was knowingly concerned in at least one other secret commission arrangement, and submits that the extent of his misconduct may be greater than is presently known.

The Bankruptcy Act

12    Section 58 of the Bankruptcy Act relevantly states that:

(3)     Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:

(a)     to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or

(b)    except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.

13    In relation to whether a debt is provable, s 82(1) of the Bankruptcy Act provides as follows:

Subject to the Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of bankruptcy, are provable in his or her bankruptcy.

14    Relevantly, s 82(2) provides that:

Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.

15    Here, GO Markets claims damages against Mr Gupta for breaches of the terms of his employment contract and breaches of fiduciary duties as well as compensation under s 1317H of the Corporations Act 2001 (Cth) for contraventions of s 182.

Legal principles

16    In Hillig, in the matter of Battaglia [2019] FCA 2191, Wigney J summarised the relevant principles at [6]–[8] as follows:

The principles concerning leave under s 58(3)(b) of the Bankruptcy Act are fairly well settled. The purpose of the requirement for leave is to ensure that a bankrupt is not subjected to a multiplicity of actions which would be both expensive and time-consuming, and in some cases unnecessary: see Zervas v Burkitt [2019] NSWCA 112 at [15].

The requirement for leave focusses attention on the choice between litigation and the proof of debt procedure in a bankruptcy. It will generally be appropriate for leave to be granted in cases where the issues would be better and more comprehensively dealt with by a contested trial of the action in a court proceeding than would be the case if the creditor was required to lodge a proof of debt in the debtor’s bankruptcy: see Allanson v Midland Credit Ltd (1977) 30 FLR 108; [1977] FCA 66. That would particularly be the case where the creditor’s claims involve other parties.

The relevant factors to be taken into account cannot be stated exhaustively and will vary from case to case: see Burkitt at [15]. Nevertheless, the factors generally considered to be relevant to such applications include: the amount and seriousness of the claims; the degree and complexity of the legal and factual issues involved; the stage to which the proceedings have progressed; the risk that the same issues would be re-litigated if the claims were to be the subject of a proof of debt; whether the claim has arguable merit; whether proceedings are already in motion at the time of the bankruptcy; whether the proceedings will result in prejudice to creditors; whether the claim is in the nature of a test case for the interest or large class of potential claimants; whether the grant of leave will result in further litigation; whether the cost of the hearing will be disproportionate to the size of the bankrupt estate; the risk of delay; and whether pre-trial procedures such as discovery and interrogatories are likely to be required or beneficial: see Cassegrain v Gerard Cassegrain & Co Pty Limited (in liq) [2012] NSWCA 435 at [33].

(Emphasis in original.)

17    In Re Sharp; Ex parte Tietyens Investments Pty Ltd (in liq) [1998] FCA 1367 at page 6, Weinberg J granted leave to the applicants to commence legal proceedings against three individual bankrupts because, among other things, “the proposed litigation may be seen as justifiable, both commercially and morally”.

Why leave should be granted

18    In the present case, several factors point to the irresistible conclusion that the applicant should be granted leave under s 58(3)(b) of the Bankruptcy Act to continue this proceeding against the respondents.

The amount and seriousness of the claims

19    GO Markets seeks leave to proceed against Mr Gupta on the basis that the claims against him are serious and the amount of the claim is substantial. So much is obvious.

20    As I have outlined above, GO Markets alleges that Mr Gupta engaged in serious and systematic dishonest conduct against GO Markets over a number of years, resulting in financial loss to the company. And, not unreasonably, GO Markets says that the full extent of the dishonest conduct and financial loss may not yet be known.

21    GO Markets alleges that Mr Gupta was involved in at least two secret commission arrangements and that he personally benefited from the Gigabit arrangement, being paid at least USD $1,116,226.79 of GO Markets’ funds. Those allegations, again obviously enough, involve allegations of serious dishonesty.

22    Consistently with the above, and as counsel for the applicant noted by reference to Re Sharp, there is force in the submission that the continuation of this proceeding is also justifiable, not only from a commercial standpoint but also from a moral one.

Complexity of the claims

23    Because the extent of the conduct and value of the damages are not yet known, it was further submitted that there may be a requirement for expert forensic accounting evidence to trace and determine the mechanics and extent of Mr Gupta’s misappropriation of funds from GO Markets during, and after, his employment.

24    Further, that matter involves some forensic complexity because:

(a)    there was evidence before me that at least one GO Markets supplier will not produce documents without a court mandated process;

(b)    Mrs Gupta has refused to produce an affidavit of assets as required by the freezing orders made in December 2024; and

(c)    Mr and Mrs Gupta have refused to produce all bank statements in their sole and joint names in breach of the ancillary orders made in December 2024.

The claim has arguable merit

25    On the material obtained to date, I accept that GO Markets has a good arguable case against Mr Gupta, along these lines:

(a)    Mr Gupta received at least USD $1,116,226.79 in secret payments from Gigabit, a third-party IT provider that was engaged to provide services to GO Markets;

(b)    Mr Gupta was the architect of the secret commission arrangement, including because he contacted Gigabit from a personal email address and gave specific instructions about the services that he wished to be provided to GO Markets;

(c)    Mr Gupta took steps to conceal the arrangement and the payments, including by requesting that Gigabit:

(i)    provide an anonymous IP address, in order to prevent GO Markets from being able to check the pricings of the services being provided by Gigabit; and

(ii)    charge an uplift on its invoices issued to GO Markets and then pay that uplift to Mr Gupta’s PayPal account.

This proceeding was already in motion at the time of the bankruptcy

26    GO Markets commenced this proceeding against Mr Gupta on 10 December 2024. This was well in advance of Mr Gupta’s bankruptcy.

27    It is also relevant that Mr Gupta voluntarily sought bankruptcy. He was not bankrupted by court order, as a result of any enforcement action of a creditor.

28    Further, Mr Gupta did not give any notice to GO Markets of his intention to declare bankruptcy. At the time of declaring bankruptcy, Mr Gupta was in default of court orders for the filing of his defence and remained in default of the ancillary orders, requiring him to produce bank statements in his sole and joint names with Mrs Gupta from January 2019 to present.

29    It was submitted, and I accept, that it is open to draw an inference that Mr Gupta voluntarily sought bankruptcy in order to avoid the obligations imposed on him by the freezing orders and ancillary orders.

This proceeding will not result in prejudice to creditors

30    Mr Gupta’s statement of affairs disclosed that he has three unsecured creditors. GO Markets is recorded as the largest unsecured creditor with a debt owing of AUD $1,768,287. The remaining unsecured creditors are ANZ Banking Group Limited (ANZ) with a debt of $10,000 and Latitude C/- Bravure (Bravure) with a debt of $12,000.

31    ANZ and Bravure are owed a small amount in comparison to GO Markets’ claim of approximately AUD $1,768,287. In those circumstances, the continuation of this proceeding will not result in material prejudice to any other creditor of Mr Gupta.

Conclusion

32    For those reasons, I made the order set out above, that GO Markets be granted leave pursuant to s 58(3)(b) of the Bankruptcy Act to continue this proceeding against the respondents.

Associate:

Dated:    27 May 2025