Insolvency, Litigation and Dispute Resolution

Are “walk away” offers valid offers of compromise which will have costs consequences?

28 June, 2017

When a person is declared a bankrupt, certain liberties are taken away from that person. One restriction includes a prohibition against travelling overseas unless the approval has been given by the bankrupt’s trustee in bankruptcy. This issue was recently considered by the Federal Court in Moltoni v Macks as Trustee of the Bankrupt Estate of Moltoni (No 2) [2020] FCA 792, which involved the Federal Court’s review of the trustee’s initial refusal of an application by a bankrupt, Mr Moltoni, to travel to and reside in the United Kingdom.

Restriction on overseas travel

Section 272(1)(c) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) prohibits a bankrupt, who has not been discharged from the bankruptcy, from leaving Australia or do any act preparatory to leave Australia, without the written consent of the trustee in bankruptcy. The trustee also has the discretion to impose conditions as part of any consent given to travel overseas (section 272(2)).

The object of these laws is to preserve the proper administration of the bankruptcy laws and the bankrupt’s estate. It is not to penalise the bankrupt, as summarised by the former Chief Justice Bowen in Weiss v Official Trustee in Bankruptcy (1983) 1 FCR 40 at 43:

  • “It is a basic principle that a resident of Australia is entitled to expect that he may travel freely notwithstanding the fact that he is a bankrupt provided it will not lead to his staying overseas in order to defeat or delay his creditors and provided it will not interfere with the due administration of his bankrupt estate…”; and
  • “The interference with the travel of bankrupts is not for the purpose of punishing or expressing disapproval of them for offences or alleged offences against the Bankruptcy Act 1966 (Cth).”


To ascertain whether Mr Moltoni’s should be permitted to travel abroad, the Court asked the following primary questions:

1. Is the proposed travel genuine?

The Court accepted that Mr Moltoni’s need to travel was “plainly genuine” given his desire to live with his wife in the United Kingdom. It was noted that Mr Moltoni’s wife could not relocate to Australia due to her own work and family commitments. Mr Moltoni also gave evidence that he would be able to obtain employment in the United Kingdom in his chosen profession as a tax accountant, while he would face difficulty in securing employment as a tax accountant in Australia.

2. Is Mr Moltoni likely to return to Australia?

The Court recognised that Mr Moltoni and his wife had “strong ties to Australia”. Both of them gave evidence to the effect that they had immediate family residing in Australia and Mr Moltoni’s wife also owns a property in Australia.

Mr Moltoni offered to provide undertakings which included, among other things, that he would reside in the United Kingdom, he would return to Australia whenever the trustee required him for a public examination and that travel, accommodation and living expenses be paid for by his wife, and that his solicitor’s office would be his address for service in Australia. Mr Moltoni’s wife offered to provide undertakings to pay for Mr Moltoni’s travel, accommodation and living expenses if Mr Moltoni was required to return to Australia to attend any public examination or for any other purpose required by the trustee.

Accordingly, the Court found it likely that Mr Moltoni would return to Australia following the request by the trustee for further investigation of Mr Moltoni’s affairs. However, the Court considered it necessary to provide protection to the trustee in the form of a mortgage granted over the wife’s property in Australia, in favour of the trustee, to provide a guarantee of approximately $500,000.

3. Will the administration of Mr Moltoni’s estate be hindered by his travel?

The trustee submitted that Mr Moltoni had concealed assets overseas, including his involvement with several overseas entities, and that if he had moved overseas, he could attempt to further conceal those assets. However, the Court was troubled with this “highly speculative” submission, as the trustee had not provided any “concrete example of anything that [Mr Moltoni] could do whilst in the United Kingdom, which he could not otherwise do from here in Australia”.

4. Has the bankrupt complied with his or her obligations to date?

The Court accepted that further investigations were required into Mr Moltoni’s affairs, including transactions said to be undertaken by Mr Moltoni through various entities controlled by him. The explanations given by Mr Moltoni for his involvement in some foreign transactions were “not particularly convincing” and the Court expressed some doubt as to whether Mr Moltoni had complied with all of his obligations under the Bankruptcy Act.

Permission granted

The Court had to balance the shortfall by the bankrupt in complying with his obligations to date against the other findings made by the Court, being:

  1. That the bankrupt’s reason for the proposed travel was for a genuine purpose;
  2. The bankrupt’s continued presence in Australia is causing significant distress for his wife who must remain in the United Kingdom for the time being and for the marriage generally;
  3. On the basis of all of the undertakings and protections given to the trustee (including a mortgage), the bankrupt will likely return to Australia when required to do so by the trustee; and
  4. That the bankrupt residing in the United Kingdom will not hamper the ongoing administration of the bankrupt’s estate.

On balance, the Court considered that “it would be in the interests of justice and just and equitable” that Mr Moltoni be permitted to travel to and reside in the United Kingdom, subject to the necessary undertakings and protections provided to the trustee. As such, on 27 May 2020, judgment was handed down in favour of Mr Moltoni.


  1. The Court is given a broad discretion to consider whether or not it would be unjust or inequitable to refuse permission, as the law is not to punish the bankrupt but to protect the administration of the bankrupt’s estate.
  2. In refusing permission to travel and in order to minimise the risk of that decision being challenged, trustees must take into account all of the above factors and demonstrate, by way of evidence, that the risk to the administration of the estate is not merely speculative.
  3. As a bankrupt, it is important to comply with any obligations under the Bankruptcy Act, including in relation to the provision of information and documents lawfully requested by the trustee in bankruptcy, as this could affect subsequent decisions made by the trustee in relation to requests to travel overseas.

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After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. 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