FEDERAL COURT OF AUSTRALIA
Davidson v Official Receiver [2021] FCAFC 73
Appeal from: Janezic v Official Receiver & Anor and Davidson v Official Receiver & Anor [2020] FCCA 1153 File number: VID 369 of 2020 Judgment of: ALLSOP CJ, MARKOVIC AND ANASTASSIOU JJ Date of judgment: 21 May 2021 Catchwords: BANKRUPTCY AND INSOLVENCY – appeal from Federal Circuit Court of Australia – where primary judge dismissed application for summary judgment to set aside notice issued pursuant to s 139ZQ of the Bankruptcy Act 1966 (Cth) by Official Receiver – where underlying basis for notice issued pursuant to s 139ZQ was to recover transfer at undervalue within meaning of s 120(1) of the Act – whether limitation period in s 127(3) of the Act requires a notice issued pursuant to s 139ZQ to be complied with or sought to be enforced within six years – appeal dismissed Legislation: Bankruptcy Act 1966 (Cth), ss 5, 30, 55, 58, 116, 120(1), 127(3), 139ZQ(1), 139ZQ(8), 139ZS(1), 139ZS(1A), 161(2), 183(2), 184(1)
Federal Court of Australia Act 1976 (Cth), s 24(1A)
Federal Circuit Court Rules 2001 (Cth), Pt 17
Cases cited: Cement Australia Pty Ltd v Australian Competition and Consumer Commission [2010] FCAFC 101; 187 FCR 261
Cooper v Moloney (No 5) [2012] SASC 211
Decor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; 33 FCR 397
Halse v Norton [1997] FCA 673; 76 FCR 389
Official Trustee in Bankruptcy v Alvaro [1996] FCA 1493; 66 FCR 372
Official Trustee in Bankruptcy v Lopatinsky [2003] FCAFC 109; 129 FCR 234
Re McLernon; Ex parte SWF Hoists and Industrial Equipment Pty Ltd v Prebble [1995] FCA 539; 58 FCR 391
Sutherland v Vale [2009] HCA 26; 237 CLR 638
Verge (Trustee), in the matter of Underdown (deceased) (a bankrupt) v Fazio [2013] FCA 18
Division: General Division Registry: Victoria National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 54 Date of hearing: 11 February 2021 Counsel for the Applicant: Mr M. Gronow QC with Mr P. Agardy Solicitor for the Applicant: Comlaw Barristers & Solicitors Counsel for the First Respondent: Ms B. Slocum Solicitor for the First Respondent: Colin Biggers & Paisley Counsel for the Second Respondent: Mr M. Galvin QC with Mr C. Fenwick Solicitor for the Second Respondent: Nicholas O’Donohue & Co ORDERS
VID 369 of 2020 BETWEEN: SAM DAVIDSON
Appellant
AND: OFFICIAL RECEIVER
First Respondent
PHILIP NEWMAN AS TRUSTEE OF THE BANKRUPT ESTATE OF WILLIAM STEPHEN VLAHOS
Second Respondent
ORDER MADE BY:
ALLSOP CJ, MARKOVIC AND ANASTASSIOU JJ
DATE OF ORDER:
21 MAY 2021
THE COURT ORDERS THAT:
1.The Appellant is given leave to appeal pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth).
2.The appeal is otherwise dismissed.
3.The Appellant pay the Respondents’ costs of and incidental to this appeal, to be taxed failing…
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- Davidson v Official Receiver [2021] FCAFC 73
- Case
- [2021] FCAFC 73
- Decision Date
CaseChat Overview and Summary
The court examined whether the notice had to be issued, and either complied with or sought to be enforced, within the six-year limitation period under section 127(3) in order to be valid. The court found that the limitation period did not apply to prevent the notice from being issued, as the notice was issued within six years of the date of bankruptcy. Furthermore, the court held that the phrase "an action" in section 127(3) should be understood as conduct by the trustee to recover money pursuant to a transaction at undervalue, not only by commencing proceedings but also by taking other steps. As a result, the court dismissed the appeal.
In conclusion, the court dismissed the appeal and found that the notice issued by the Official Receiver was valid, as it was issued within the six-year limitation period under section 127(3) of the Act. The court also held that the phrase "an action" in section 127(3) should be understood as conduct by the trustee to recover money pursuant to a transaction at undervalue, not only by commencing proceedings but also by taking other steps. The Appellant was given leave to appeal but the appeal was otherwise dismissed, and the Appellant was ordered to pay the Respondents' costs of and incidental to this appeal.
Orders
Orders of the court
1. The Appellant is given leave to appeal pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth).
2. The appeal is otherwise dismissed.
3. The Appellant pay the Respondents’ costs of and incidental to this appeal, to be taxed failing agreement.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
These orders have been amended in accordance with r 39.05(h) of the Federal Court Rules 2011.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
The Trustee submitted that neither the trustee in question nor the Official Receiver could be appraised of all such factors at the time of issuing a notice pursuant to s 139ZQ. Accordingly, such a construction would be contrary to the intent of the legislature when enacting Subdivision J of the Act. Consideration of Grounds 1 to 4 It is not in dispute in this appeal that:(1)the Bankrupt became bankrupt on 16 December 2013, when his debtor’s petition was accepted by the Official Receiver;(2)the Bankrupt was discharged from bankruptcy three years from the commencement of his bankruptcy, on 16 December 2016; (3)the Notice was issued pursuant to s 139ZQ and was given to Mr Davidson by the Official Receiver within six years of the date of the Bankrupt becoming bankrupt; (4)the Appellant made an application to set aside the Notice within the 60 day period prescribed by s 139ZS(1A); (5)the time for payment of the amount claimed under the Notice did not expire until after the expiration of limitation period specified in s 127(3) for an action under s 120 of the Act; and(6)the time for commencing proceedings under s 120 of the Act has now expired. Therefore, the Trustee can no longer seek a declaration that the transfer of property by the Bankrupt is void as against the trustee. Having regard to the above facts, it is clear that the issue of whether a notice issued pursuant to s 139ZQ may be issued after the expiration of a limitation period under s 127(3) does not arise on these facts. We do not accept the Appellant’s contention that the Notice had to be issued, and either complied with or sought to be enforced, within the six-year limitation period in s 127(3) in order to be valid. Indeed, it is apparent from the chronology of events set out above that at the time the Notice was issued to the Appellant, the time limited by s 127(3) had not yet expired. In those circumstances, the Official Receiver could not be precluded from issuing a notice pursuant to his powers under s 139ZQ, by reason of s 127(3) of the Act. This conclusion is fortified by the following considerations. First, as we have indicated, in circumstances where the Notice was issued within six years of the date of bankruptcy, there can be no recourse to the limitation period in s 127(3) to set aside that Notice. Further yet, in the circumstances of the present case, if the Trustee were to bring an action under s 139ZQ(8) to recover the amount payable under the Notice as a debt, the Appellant could not rely on s 127(3) to bar that cause of action. Plainly, at the time the Notice was issued, the transaction the subject of the Notice was allegedly void (in the sense of voidable). Second, there is no basis to interpret the phrase “an action” in s 127(3) as being limited to a proceeding. Properly understood, an action must be understood as conduct by the trustee to recover money pursuant to a transaction at undervalue, not only by commencing proceedings but also by the taking of other steps.