The recent Federal Magistrate’s decision in Commonwealth Bank of Australia v Oswal [2012] FMCA 1082 reminds us that leaving a jurisdiction does not mean leaving your business behind, including the business of paying debts.

Background

Mr Oswal guaranteed a loan of $27 million from the Commonwealth Bank of Australia (CBA) to Garuda Aviation Pty Ltd (Garuda) for the purchase of a jet plane.  Mr Oswal was, and remains, a director of Garuda.

CBA obtained a judgment against Mr Oswal for monies owed under the guarantee.  The judgment debt was not paid and CBA obtained orders for substituted service of a Bankruptcy Notice on Mr Oswal in India and via his lawyers in Australia.

Mr Oswal failed to comply with, or respond in any way, to the Bankruptcy Notice.  CBA then issued a Creditor’s Petition seeking a sequestration order against his estate.

As Mr Owsal was no longer in Australia and had no present plans or intention of returning, CBA applied for orders for substituted service of the Creditor’s Petition on Mr Oswal.  

Decision

Before making the orders sought, the Court confirmed that it had first to reach a provisional conclusion that CBA had an arguable case.  In order to satisfy this requirement CBA had to show that Mr Oswal was ‘carrying on business in Australia’ at the time of the act of bankruptcy.

Under s 43(3)(1)(b)(iii) of the Bankruptcy Act, a person continues to carry on business in Australia until his affairs are concluded, including payment of debts.

The Court agreed that the nature of the inter-relationship between Mr Oswal, Garuda and the Burrup Trust, was such that the Burrup Trust and Burrup Holdings Pty Ltd were to be the ultimate source of funds to meet the repayments by Garuda.

ASIC searches presented by CBA indicated that Mr Oswal was a director of, and shareholder in, multiple Australian companies including Burrup Fertilisers Pty Ltd and Burrup Holdings Pty Ltd.  Mr Oswal carried on business on his own account utilising various Australian companies including using Burrup Fertilisers and the substantial business operation it had Australia.

The court was therefore able to conclude that it was arguable that Mr Oswal was carrying on business in Australia when he committed the act of bankruptcy alleged. 

The court made orders for substituted service by means including service on two Australian legal firms representing Mr Oswal in other proceedings and by post to an address in India.

Comment

This case confirms that ‘carrying on business’ continues until debts are paid, and leaving the country will not necessarily avoid the court’s jurisdiction.