The Federal Court has flexed its muscles in a dispute between a lender and the owner of an insolvent business, ordering the sole director of the company to surrender his passport and not travel outside New South Wales without the court’s consent.

Building materials supplier Penny World had been a client of invoice finance company Scottish Pacific since 2019 and owed more than A$3 million when receivers, and later a provisional liquidator, were appointed this year.

ScotPac went to court in June to ask for an order to freeze the bank account of Wizly Pty Ltd, whose sole director and shareholder Shadi Qaqour is also the sole director and shareholder of Penny World.

ScotPac presented evidence that funds it advanced to Penny World were moved into the Wizly account and used for personal spending by Qaqour. 

It also alleged that some of the invoices that Penny World assigned to ScotPac for funding were fabricated.

The court made a freezing order on June 14. The liquidator then went to court to apply for the travel ban.

In granting the travel ban, the court said: “The evidence before the court was that the company, under the control of the defendant, had been used as a vehicle for what appeared to be fraudulent conduct involving the obtaining of large sums of money from Scottish Pacific Business Finance Pty Ltd.

“The evidence indicated that the defendant was not only using the money advanced to the company by ScotPac as his own money, but that these funds had provided him with the facility and means to travel overseas.”

The court accepted that there was a prima facie case that Qaqour is liable to repay the money and there was evidence that Qaqour intends to “leave Australia in order to avoid his potential liability to the company”.

In a note to clients on the ruling, Corrs Chambers Westgarth said: “The decision serves as a reminder to insolvency practitioners and their advisers of the extensive powers available to courts to hold individuals accountable to a company in liquidation.”