Davidson v Official Receiver
[2023] FedCFamC2G 137
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Davidson v Official Receiver [2023] FedCFamC2G 137
File number: MLG 319 of 2020 Judgment of: JUDGE RILEY Date of judgment: 24 February 2023 Catchwords: BANKRUPTCY – application to transfer proceeding to the Federal Court of Australia – application not supported by affidavit – application dismissed. Legislation: Federal Circuit and Family Court of Australia Act 2021 s.153(1)
Federal Circuit And Family Court Of Australia (Division2) (General Federal Law) Rules 2021 r.8.02
Cases cited: White v Ljubicic [2017] FCA 717 Division: Division 2 General Federal Law Number of paragraphs: 30 Date of last submission: 27 January 2023 Date of hearing: On the papers Place: Melbourne Solicitor for the Applicant: Comlaw Barristers & Solicitors Solicitor for the First Respondent: Colin Biggers & Paisley Solicitor for the Second Respondent: Nicholas O’Donohue & Co ORDERS
MLG 319 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: SAM DAVIDSON
Applicant
AND: OFFICIAL RECEIVER
First Respondent
PHILIP NEWMAN AS TRUSTEE OF THE BANKRUPT ESTATE OF WILLIAM STEPHEN VLAHOS
Second Respondent
order made by:
JUDGE RILEY
DATE OF ORDER:
24 February 2023
THE COURT ORDERS THAT:
1.The requirement in r.8.02(1)(a) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 that a transfer application be made before the first court date for the proceeding be dispensed with.
2.The requirement in r.8.02(1)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 that a transfer application be supported by affidavit be dispensed with.
3.The applicant’s oral application for these proceedings to be transferred to the Melbourne Registry of the Federal Court of Australia be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE RILEY:
This is an application made pursuant to s.153(1) of the Federal Circuit and Family Court of Australia Act 2021 for the transfer of this proceeding to the Federal Court of Australia.
The applicant in the proceeding generally and in the transfer application is Mr Davidson. The first respondent is the Official Receiver. The second respondent is the trustee in bankruptcy of William Stephen Vlahos.
The Official Receiver neither consents to nor opposes the transfer application. The trustee has submitted that many of the factors that the court must consider in a transfer application are neutral in the present case, while one factor weighs in favour of the transfer and one factor weighs against transfer.
Mr Davidson made the transfer application orally to a registrar of this court. The registrar adjourned the transfer application to me to be determined on the papers. “The papers” consist of written submissions filed by each party pursuant to orders of the registrar.
Rule 8.02(1)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (“the Rules”) requires that a transfer application be supported by affidavit. Mr Davidson did not file an affidavit in support of his transfer application. He submitted that, in the orders adjourning the transfer application to me, the registrar, by implication, dispensed with the requirement for an affidavit in support of the application. The other parties did not submit otherwise. From an abundance of caution, I will dispense with the requirement for a supporting affidavit. However, in the absence of a supporting affidavit, there is no evidence before the court about some relevant matters, as discussed below.
Rule 8.02(1)(a) of the Rules requires that a transfer application be made before the first court date. Mr Davidson submitted that the court should waive that requirement. The other parties did not oppose that course. I accept that, in all the circumstances of this case, it is appropriate to dispense with the requirement in r.8.02(1)(a) of the Rules.
BACKGROUND
In paragraph 5 of his submissions filed on 19 December 2022, Mr Davidson set out the background to this matter as follows:
(a)On 6 December 2019 the first respondent (Official Receiver), at the request of the first respondent (Trustee), issued a notice under section 139ZQ of the Bankruptcy Act 1966 (Cth) (BA) addressed to the applicant demanding payment of $12,507,025.84.
(b)The claim in the Notice was based on section 120 of the BA, which relates to undervalued transactions.
(c) The Trustee’s claim is for payments made by William Stephen Vlahos (Bankrupt) to the applicant.
(d) The Bankrupt had operated a betting scheme in which he told investors he would bet on racehorses and distribute winnings to investors. The applicant had a contractual agreement with the Bankrupt that he entered into in good faith on the basis that the Bankrupt would lodge bets on identified racehorses according to the Bankrupt’s betting scheme and would return winnings to investors and syndicate members.
(e)The applicant was a syndicate leader. He collected money from friends and relatives to pass on to the Bankrupt to place bets on horse races. He received back from the Bankrupt money that the Bankrupt told him were winnings, and which he distributed to syndicate members, including himself.
(f)In White v Ljubicic the Trustee had recovered moneys allegedly paid by the Bankrupt to an investor. The claim was brought under section 120 of the BA.
(g)In the Notice the Official Receiver relied on White, a decision of Beach J. His Honour had stated:
Given the trustees’ investigations into the Edge punting club, it would appear that the respondent has provided no consideration for the funds received by him. Indeed, there is no evidence of any such consideration. Moreover, the respondent has been given an adequate opportunity by the trustees to put forward any such evidence.
(h) On 31 January 2020 the applicant filed an application under section 139ZS of the BA in this Honourable Court to set aside the Notice.
(i)In that application the applicant sought, amongst other things, a declaration that the Notice was statute barred.
(j) The applicant applied for summary judgment. That application was dismissed by Judge Riethmuller.
(k) An appeal to the Full Court of the Federal Court was dismissed.
(l) On 3 December 2021 the applicant’s application for special leave to appeal to the High Court of Australia was refused.
(m) On 21 February 2020 the Trustee had applied to transfer this proceeding to the Federal Court. That application was opposed by the applicant. The application for transfer was dismissed.
(n) The Trustee had commenced a number of other proceedings under section 120 of the BA in the Federal Court against other persons who had received money from the Bankrupt.
(o) There was a mediation before the Registrar on 29 May 2020. The mediation resumed on 28 November 2022. There was no resolution of this proceeding.
(p) After the mediation the Registrar made orders and directions. Those orders included a direction for filing these submissions.
(footnotes omitted)
In his written submissions filed on 27 January 2023, the trustee set out the background to the matter as follows:
6.Between around 2005 and 2013, Vlahos conducted a Ponzi scheme which he called ‘The Edge’ wherein the notional investment was wagering on horse races.
7. Vlahos pleaded guilty to two charges of obtaining financial advantage by deception in relation to the scheme and, on 17 December 2021, was sentenced to 9 years’ imprisonment with 6 years’ non-parole period.
8. The wagering reported to scheme members was fictional. Notional amounts of ‘profit’ were paid out to certain scheme members based on that fiction. Other scheme members lost their money. The Trustee has received proofs of debt in the administration of the bankrupt estate totalling over $150 million. The Trustee is in the process of recovering the fictitious profits paid to certain scheme members so that those amounts can be shared by all creditors.
9. In the case of the Applicant, he received from Vlahos $13,277,669.00 (via 25 payments by cheque and EFT, 16 of those payments being via Vlahos’ company Noble Edict) having deposited with Vlahos $770,643.16. The Trustee is seeking recovery for the benefit of creditors of the net amount of $12,507,025.84, as being void ‘undervalued transactions’ pursuant to section 120 of the Bankruptcy Act 1966 (Cth) (Act).
10. On 6 December 2019, at the request of the Trustee, the Second Respondent issued a notice under section 139ZQ of the Act demanding payment of that sum (Notice).
11.On 31 January 2020, the Applicant filed an application under section 139ZS of the Act in this Court seeking to have the Notice set aside.
12. On 21 February 2020, the Trustee applied to transfer this proceeding to the Federal Court.
13. The Trustee made that application for two main reasons. First, the Applicant in his application sought a declaration pursuant to section 30(1) of the Act that the giving of the Notice was statute barred under section 127(3) of the Act. Accordingly, it was anticipated that there was a matter of general importance on which a superior court decision was desirable (ie the proper construction of the inter-relationship between sections 120, 127(3), and 139ZQ of the Act). Second, there were at that time a number of other similar proceedings in the Federal Court and which were being case managed by Her Honour Justice Davies.
14. The Trustee’s application for transfer was opposed by the Applicant and dismissed by the Court.
15. The issue as to whether the Notice was statute barred has been resolved in favour of the Trustee. The Applicant’s application for summary judgment was dismissed by this Court ([2020] FCCA 1153), an appeal to the Full Court was dismissed ([2021] FCAFC 73) and, ultimately, the High Court refused special leave to appeal on 3 December 2021 ([2021] HCA Trans 208).
16. Save for the Ragogna Matter, the other similar cases in the Federal Court have been settled.
(footnotes omitted)
LEGISLATION
Section 153 of the Federal Circuit and Family Court of Australia Act 2021 relevantly provides that:
Discretionary transfer of proceedings
(1) If:
(a)a proceeding is pending in the Federal Circuit and Family Court of Australia (Division 2); …
…
the Court may, by order, transfer the proceeding from the Court to the Federal Court.
…
(3)In deciding whether to transfer a proceeding to the Federal Court, the Federal Circuit and Family Court of Australia (Division 2) must have regard to:
(a) any Rules of Court made for the purposes of subsection 154(2); and
(b) whether proceedings in respect of an associated matter are pending in the Federal Court; and
(c) whether the resources of the Federal Circuit and Family Court of Australia (Division 2) are sufficient to hear and determine the proceeding; and
(d) the interests of the administration of justice.
…
Rule 8.02 of the Rules provides that:
…
(4) In addition to the factors to which the Court must have regard under subsection 153(3) of the Act in deciding whether to transfer a proceeding to the Federal Court, the Court must take the following factors into account:
(a) whether the proceeding is likely to involve questions of general importance, such that it would be desirable for there to be a decision of the Federal Court on one or more of the points in issue;
(b) whether, if the proceeding is transferred, it is likely to be heard and determined at less cost and more convenience to the parties than if the proceeding were not transferred;
(c) whether the proceeding will be heard earlier in the Court;
(d) the availability of particular procedures appropriate for the class of proceeding;
(e) the wishes of the parties.
(5) Before the Court makes an order under subsection 153(1) of the Act transferring a proceeding from the Court to the Federal Court:
(a) the Court must consult the Chief Judge of the Court in relation to the proposed transfer; and
(b) the Chief Judge of the Court must consult the Chief Justice of the Federal Court, or a delegate of the Chief Justice of the Federal Court, in relation to the proposed transfer.
(6) A failure to comply with this rule in relation to a proposed transfer of a proceeding under subsection 153(1) of the Act does not affect the validity of an order made under that subsection transferring the proceeding.
FACTORS SPECIFIED IN THE RULES
a. question of general importance
Mr Davidson submitted that there was a question of general importance in this case but did not specifically say what it was. The trustee submitted that there was no question of general importance in this case, and this factor weighed against transfer.
Mr Davidson said that there were various legal and factual arguments that he wished to run. However, none of them seem to me to amount to a question of general importance.
Mr Davidson said that there was public interest in the case. That may amount to no more than idle curiosity. It is different to the public having a benefit or detriment depending on how the matter is determined, which is the proper meaning of public interest. It is not apparent how the public might have that sort of interest in this case.
Mr Davidson, in addition, submitted that the decision in White v Ljubicic [2017] FCA 717 was a decision of Federal Court, which should not be followed, and therefore the matter should be heard in the Federal Court. However, Mr Davidson also argued that White is readily distinguishable, which seems to be the case. Consequently, I do not consider that Mr Davidson’s wish for the court to depart from White is a reason for transferring the matter to the Federal Court.
All in all, I do not consider that this factor favours a transfer to the Federal Court.
b. cost and convenience
Mr Davidson did not directly address this issue in his submissions and did not provide any evidence relevant to this issue. The trustee submitted that there was unlikely to be any difference between the two courts. In the absence of evidence on the issue, the trustee submitted that this was a neutral factor.
I accept the trustee’s submissions on this matter.
c. timing of hearing
Mr Davidson did not directly address this issue in his submissions and did not provide any evidence relevant to this issue. In the absence of evidence on the issue, the trustee submitted that this was a neutral factor.
I accept the trustee’s submissions on this matter.
d. particular procedures
Mr Davidson did not directly address this issue in his submissions and did not provide any evidence relevant to this issue. The trustee submitted that, as the jurisdictions of this court and the Federal Court are concurrent, this was a neutral factor.
In the absence of evidence that a particular procedure available in the Federal Court but not available in this court would be of assistance in this matter, this factor does not favour a transfer.
e. wishes of the parties
Mr Davidson wishes that the matter be transferred. The trustee said this factor is neutral, given the absence of evidence about the likely date of hearing in this court and in the Federal Court.
This factor favours a transfer, as Mr Davidson seems to have a strong preference.
OTHER FACTORS SPECIFIED IN THE ACT
a. whether associated proceedings are pending in the Federal Court
Mr Davidson did not address this matter specifically. The trustee noted that, previously, there were a number of related matters pending in the Federal Court. However, now, most of them have settled. Only one remains, Ragogna. The trustee submitted that this factor weighed somewhat in favour of a transfer to the Federal Court.
There was no evidence before the court about how similar Ragogna is to the present matter, in terms of the arguments that the parties wish to run and the evidence that will need to be adduced. There was also no evidence about whether the parties in Ragogna and in this matter may wish to have their matters heard together or in some other way benefit from the two matters being heard in the Federal Court. In the absence of evidence, I am unable to be satisfied that the pendency of Ragogna in the Federal Court is a matter in favour of transfer.
b. resources
Mr Davidson did not address this matter specifically. The trustee said that, in the absence of evidence about the comparative resources of this court and the Federal Court, this factor was neutral.
The parties have not told the court how long the trial is expected to take. It is therefore not possible to assess whether the resources of this court will be insufficient to deal with this matter in a timely way.
c. interests of the administration of justice
Mr Davidson asserted that it was in the interests of the administration of justice to transfer the proceeding to the Federal Court, but did not explain why. The trustee said that, in the absence of evidence about the comparative resources of this court and the Federal Court, this factor was neutral.
In the absence of an estimate of the likely duration of the trial, and in the absence of evidence about the comparative resources of this court and the Federal Court, I am not able to assess whether the interests of the administration of justice would be better served by the matter remaining in this court or being transferred to the Federal Court.
CONCLUSION
Weighing up the various matters that I am required to consider, I am not persuaded that this is an appropriate matter to transfer to the Federal Court. Mr Davidson’s wishes are not sufficient to justify a transfer. The pendency of Ragogna in the Federal Court is not sufficient to justify a transfer, in circumstances where there is no evidence about the actual benefit to any party that might arise from a transfer. Mr Davidson’s wishes and the pendency of Ragogna in the Federal Court taken cumulatively are not sufficient to justify a transfer. Otherwise, the factors are neutral. Consequently, the transfer application will be dismissed.
I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Riley. Associate:
Dated: 24 February 2023
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