FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Davidson v Official Receiver (No 2) [2024] FedCFamC2G 429
File number: MLG 319 of 2020 Judgment of: JUDGE RILEY Date of judgment: 15 May 2024 Catchwords: BANKRUPTCY – application under s.139ZS of the Bankruptcy Act 1966 to set aside a notice under s.139ZQ of the Act – whether payments void under s.120 of the Act – value of consideration – significance of the payments from the bankrupt having been disbursed to third parties prior to the commencement of the bankruptcy – whether incorrect figure in the s.139ZQ notice requires it to be set aside. Legislation: Bankruptcy Act 1966 ss. 15(5), 120, 127, 139ZS, 139ZQ Cases cited: Anscor Pty Ltd v Clout (Trustee) (2004) 135 FCR 469; [2004] FCAFC 71
Associated Alloys Pty Limited v ACN 001 452 106 Pty Ltd [The Associated Alloys Case] (2000) 202 CLR 588; (2000) 202 CLR 588; (2000) 171 ALR 568; (2000) 74 ALJR 862; (2000) 21(9) Leg Rep 9; (2000) 18 ACLC 509; (2000) 46 ATR 91; (2000) Aust Contract R 90-114
Brady v Stapleton (1952) 88 CLR 322; [1952] ALR 989; (1952) 26 ALJR 428
Clout v Anscor Pty Ltd [2003] FCA 326
Ex Parte James (1874) LR 9 Ch App 609 [1874-80] All ER Rep 388; (1874) 30 LT 773; (1874) 22 WR 937
McBain v Parsons [2000] FCA 935
Parsons v McBain (2001) 109 FCR 120; (2001) 192 ALR 772; [2001] FCA 376
Re O'Halloran [2002] FCA 1305
Roufeil v Tarrant Enterprises Pty Ltd (2023) 299 FCR 204; [2023] FCAFC 142
SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362; (2017) 91 ALJR 936; (2017) 347 ALR 405; [2017] HCA 34
Taylor v Owners – Strata Plan No 11564 (2014) 253 CLR 531; (2014) 88 ALJR 473; (2014) 306 ALR 547; [2014] HCA 9
Tsakirakis v Official Receiver (2013) 276 FLR 66; [2013] FCCA 106
Vale v Sutherland (2009) 237 CLR 638; (2009) 83 ALJR 940; (2009) 258 ALR 1; [2009] HCA 26
Westpac Banking Corporation v The Bell Group Ltd (in liq) (No 3) (2012) 44 WAR 1; (2012) 270 FLR 1; (2012) 89 ACSR 1; [2012] WASCA 157
White (Trustee), in the matter of Vlahos (Bankrupt) v Ljubicic [2017] FCA 717Division Division 2 General Federal Law Number of paragraphs: 137 Dates of hearing: 4 and 5 March 2024 Place: Melbourne Counsel for the Applicant: Michael Gronow KC and Peter Agardy Solicitor for the Applicant: Comlaw Barristers and Solicitors Counsel for the First Respondent: Georgina Costello KC and Bridget Slocum Solicitor for the First Respondent: Colin Biggers & Paisley Counsel for the Second Respondent: Michael Galvin KC and Chris Fenwick Solicitors for the Second Respondent: Nicholas O’Donohue and Co ORDERS
MLG 319 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF WILLIAM STEPHEN VLAHOS, BANKRUPT
BETWEEN: SAM DAVIDSON
Applicant
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Details
- AGLC
- Davidson v Official Receiver (No 2) [2024] FedCFamC2G 429
- Case
- [2024] FedCFamC2G 429
- Decision Date
CaseChat Overview and Summary
In the case of Davidson v Official Receiver (No 2), the applicant, Sam Davidson, sought to set aside a notice issued by the Official Receiver under section 139ZQ of the Bankruptcy Act 1966 (Cth). The notice was issued in relation to the bankruptcy of William Stephen Vlahos, who was the principal of a fraudulent gambling scheme known as 'The Edge'. The Official Receiver, acting on the application of the trustee, issued the notice to the applicant seeking to recover certain payments made to the applicant by the bankrupt and his associated company, Noble Edict Pty Ltd. The applicant argued that the notice should be set aside on the basis that it contained an incorrect figure and that the payments were not void under section 120 of the Act.
The primary legal issues before the court were whether the payments made to the applicant by the bankrupt and his associated company were void under section 120 of the Act, and if so, whether the incorrect figure in the notice required it to be set aside. The court had to determine the value of the consideration for the payments, and whether the fact that the payments had been disbursed to third parties prior to the commencement of the bankruptcy was significant. The court also had to consider whether the incorrect figure in the notice required it to be set aside.
The court held that the payments made to the applicant by the bankrupt and his associated company were not void under section 120 of the Act. The court found that the payments were made in the ordinary course of business and that there was no evidence of any fraudulent intent on the part of the applicant. The court also held that the fact that the payments had been disbursed to third parties prior to the commencement of the bankruptcy was not significant. The court further held that the incorrect figure in the notice did not require it to be set aside, as the error did not affect the applicant's ability to respond to the notice.
The court dismissed the applicant's application to set aside the notice. The court held that the trustee was entitled to seek to recover the payments made to the applicant by the bankrupt and his associated company, and that the incorrect figure in the notice did not affect the validity of the notice. The court ordered that the application be dismissed with costs.
The primary legal issues before the court were whether the payments made to the applicant by the bankrupt and his associated company were void under section 120 of the Act, and if so, whether the incorrect figure in the notice required it to be set aside. The court had to determine the value of the consideration for the payments, and whether the fact that the payments had been disbursed to third parties prior to the commencement of the bankruptcy was significant. The court also had to consider whether the incorrect figure in the notice required it to be set aside.
The court held that the payments made to the applicant by the bankrupt and his associated company were not void under section 120 of the Act. The court found that the payments were made in the ordinary course of business and that there was no evidence of any fraudulent intent on the part of the applicant. The court also held that the fact that the payments had been disbursed to third parties prior to the commencement of the bankruptcy was not significant. The court further held that the incorrect figure in the notice did not require it to be set aside, as the error did not affect the applicant's ability to respond to the notice.
The court dismissed the applicant's application to set aside the notice. The court held that the trustee was entitled to seek to recover the payments made to the applicant by the bankrupt and his associated company, and that the incorrect figure in the notice did not affect the validity of the notice. The court ordered that the application be dismissed with costs.
Orders
Orders of the court
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Background
Background to the litigation
If not for the application under s.15(5) of the Act, the Official Receiver would have submitted to any order made by the court. As the matter stands, the Official Receiver did not wish to be heard on the matters raised by Mr Davidson, other than the point under s.15(5) of the Act.LIST OF AGREED FACTS The parties filed a list of agreed facts which was as follows:1 William Stephen Vlahos (Bankrupt) became bankrupt on 16 December 2013 when his debtor’s petition was accepted by the Official Receiver.2 Philip Newman and Clyde Peter White were initially appointed joint and several trustees of the estate of the Bankrupt. Mr White resigned as trustee on 8 June 2018 and since that date Mr Newman has been the sole trustee (Trustee).3 Pursuant to subsection 115(2) of the Bankruptcy Act 1966 (Cth) ('the Act'), the bankruptcy has relation back to, and is deemed to have commenced on 16 December 2013, on which the Debtor committed an act of bankruptcy, namely presenting his debtor's petition to the Official Receiver.4 Prior to his bankruptcy the Bankrupt was involved in organising a gambling scheme known as ‘The Edge’, pursuant to which he pooled money on behalf of a number of members, including syndicates and sub-syndicates of members, for the purported purpose of wagering on horse races. The general nature of the scheme that the Bankrupt established is briefly summarised in White (Trustee); In the matter of Vlahos (a bankrupt) v Ljubicic [2017] FCA 717 at [4].15 The Applicant, Sam Davidson, became an investor in The Edge in about January 2005.6 Between about 14 January 2005 and about 2 September 2013 the Applicant transferred a total of $1,879,116.49 to the Bankrupt, as set out in the attached Schedule A, to bet on racehorses.7 Between 1 January 2008 and 31 December 2013, on Friday nights or Saturday mornings, the Bankrupt sent emails to scheme members attaching ‘ratings sheets’ which purported to detail ‘bet sizes’ to be bet by the Bankrupt on specified horses if odds at or exceeding ‘rated prices’ for those horses could be obtained.8 The day after the race meetings the Bankrupt sent emails to scheme members attaching ‘betting sheets’ detailing what purported to be an account of the previous day’s betting.9 The betting sheets falsely reported The Edge’s betting to members by overstating or fabricating, variously, the bets placed, the odds obtained and the profits made.10 The Bankrupt pleaded guilty to charges of obtaining financial advantage by deception in respect of The Edge and as a result on 17 December 2021, the Bankrupt was sentenced to a term of imprisonment.211 Between about 3 July 2009 and about 10 April 2012 the Bankrupt transferred to the Applicant sums totalling $3,857,669, being the total of transfers numbered i to ix inclusive as set out in the attached Schedule B, which amounts were paid from the Bankrupt’s bank account (Vlahos Account).12An Australian company named Noble Edict Pty Ltd (Noble Edict) was incorporated and registered on 2 November 2007.13 Between 2 November 2007 and 20 March 2012, Joanne Vlahos, the wife of the Bankrupt, was the sole director of Noble Edict.14 Between 19 March 2012 and 16 December 2013, the Bankrupt, was the sole director and secretary of Noble Edict.15 On 19 June 2012 the Bankrupt opened a bank account with National Australia Bank Ltd in the name of Noble Edict as trustee for the Noble Edict Investment Trust, with BSB 083-155 and account number 12-691-1188 (Noble Edict Account).16 Between about 11 July 2012 and about 23 May 2013 (Period), the amounts particularised in paragraphs x to xxv in the attached Schedule B, totalling $9,420,000, were electronically transferred to the Applicant from the Noble Edict Account as set out in Schedule B.17 Noble Edict went into liquidation on 6 May 2014. Laurence Andrew Fitzgerald and Stephen Robert Dixon were appointed liquidators.18 Noble Edict was deregistered on 18 September 2017.19 On 6 December 2019 the Official Receiver, on the application of the Trustee, issued a notice to the Applicant under section 139ZQ of the Act (Notice).20 The application by the Trustee to the Official Receiver to issue the Notice was made on 14 November 2019.21 The amount of the claim made in the notice was $12,507,025.84. Since the Notice was issued, the Trustee has confirmed additional transfers made by the Applicant to the Bankrupt (not accounted for in the notice), being the transfers numbered 3,7,8 and 10 in the attached Schedule A totalling $1,108,473.33, as a result of which the Trustee has reduced his claim to $11,398,552.51, calculated as follows:(a) funds transferred by the Bankrupt to the Applicant $3,857,669; plus(b) funds transferred by Noble Edict to the Applicant $9,420,000; less(c) funds transferred by the Applicant to the Bankrupt $1,879,116.49.FN 1: Janezic v Official Receiver & Anor and Davidson v Official Receiver & Anor [2020] FCCA 1153 at [2] and undisturbed on appeal.FN 2: DPP v Vlahos [2021] VCC 2074 at [1].SCHEDULE A[payments by Mr Davidson to Mr Vlahos]
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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