How not to go about replacing a trustee

It perhaps comes as no surprise that a man who’s defrauded our electoral processes, assaulted his missus, thumped a journalist, forged documents, and been banned, bankrupted and gaoled, might also find reasons to be aggrieved with his trustee.

Nor does it surprise iNO that a court, having considered the numerous grounds advanced to justify an inquiry into the trustee’s conduct, might instead punt this man’s application and leave said trustee undisturbed.

” … none of the grounds give rise to any matter which warrants an investigation into the trustee’s conduct. It follows that the application should be dismissed.” Justice Scott Goodman.

For trustees and their legal advisors, the recent decision of Federal Court judge Scott Goodman in the matter of Mehajer v Weston in his capacity as trustee of the bankrupt estate of Mehajer [2023] FCA 1230 provides an essential template for understanding the hurdles aggrieved applicants must surmount to show that a conduct inquiry is justified.

And based on available public records, the applicant – former Auburn deputy mayor Salim Mehajer – is mightily aggrieved with DW Advisory partner and insolvency practitioner Paul Weston.

Whilst Mehajer is no longer in gaol he remains an undischarged bankrupt, despite his best efforts to effect an annulment.

Ignoring for a moment the 11 grounds Mehajer advanced and which are documented in full by the judge, a search of the National Personal Insolvency Index (NPII) shows that since being appointed Mehajer’s trustee in 2018, Weston has lodged objections to Mehajer’s discharge from bankruptcy on three occasions, most recently on August 1 this year.

Weston’s reasons for keeping Mehajer bankrupt include his failure to pay an amount he was liable to pay under section 139ZG of the Bankruptcy Act and “intentionally provided false or misleading
information to the trustee”.

Those objections might form part of the basis for one of the more curious grounds Mehajer identified in his application for an inquiry into Weston’s conduct and eventual removal, that being “unjustified discomfitures” allegedly imposed upon the bankrupt by Weston’s actions.

Now iNO thinks it’s a bit rich for a fraudster who’s gangsta’-fantasist wedding shut a Sydney street in 2015 to be whining about “unjustified discomfitures” but this barely rendered the fat on the rump cap of beefs Mehajer listed.

There was Weston’s alleged failure to object to tax assessments issued to Mehajer, or in the alternative, his failure in his capacity as trustee to provide his consent so Mehajer could object. Those two matters comprise the first two grounds upon which Mehajer relied.

Ground three related to the allegation that Weston took too long to adjudicate on certain proofs of debt, thereby extending the period of the bankruptcy and racking up excessive costs.

Ground four related to the assignment of a costs order against the bankrupt to Hong Kong-based distressed debt specialist SC Lowy.

Weston didn’t assign the costs order to SC Lowy – that was liquidators Christian Sprowles and Michael Hogan – but Mehajer blamed Weston for the fact that the assignment allowed SC Lowy to lodge a proof of debt in his bankruptcy which gave it standing to then oppose Mehajer’s second annulment application in circumstances where he purportedly had a claim against SC Lowy for $35 million.

Mehajer also impugned Weston’s conduct by asserting that the trustee should have sold the claim against SC Lowy to Mehajer’s sister, who initially offered $100,000, dropped it to $10,000, then $5,000 before upping it to $50,000 on learning that Weston was supposedly entertaining superior offers.

Ground six saw Mehajer complain that Weston’s conduct should be the subject of an inquiry because in his reports to creditors he included certain companies and individuals as creditors that Mehajer insisted had been paid in full, though he provided no proof of such payments to the court.

It’s ground seven where Mehajer summarised the adverse effects Weston’s combined actions have supposedly had upon him, saying they’ve caused him “extreme hardship, mental distress, severe anxiety, pressure from family members” and “unjustified discomfitures”, a summary the judge acknowledges comes from the breakdown in the relationship between bankrupt and trustee.

“It is apparent from the correspondence that has passed between them that there is tension in the relationship between Mr Mehajer and the trustee,” the judge said.

“However, there is no evidentiary basis from which to conclude that the trustee is the cause of such tension much less that there has been conduct of the trustee which warrants an inquiry?”

Grounds eight related to a conflict of interest the bankrupt alleged came into existence when Weston moved from PKF to DW Advisory.

This was supposedly because Mehajer had had dealings previously with DW principal Anthony Elkerton and those dealings were such that Weston was compromised as his trustee.

Regrettably for iNO, he refused to disclose the nature of those dealings to the court out of a concern that they would be reported in the media.

Ground nine related to Weston’s decision not to convene a meeting creators to consider a resolution to replace him, something Weston couldn’t do because the essential requirements pursuant to Section 75-15 of the Insolvency Practice Schedule (Bankruptcy) weren’t triggered.

Then there was ground 10, in which the bankrupt asserted that Weston’s conduct should be examined because he refused to consent to the proposed auction of a property in the bankrupt’s name unless a range of perfectly reasonable conditions were met. They weren’t.

The final ground for complaint relates to the multiple objections to discharge Weston has lodged with Australian Financial Security Authority (AFSA).

Justice Goodman however was no more troubled by this assertion than any of the others, concluding that ” … none of the grounds give rise to any matter which warrants an investigation into the trustee’s conduct. It follows that the application should be dismissed,” the judge declared.