Gouras v Voitin (No 3)
[2024] FedCFamC2G 5
•10 January 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Gouras v Voitin (No 3) [2024] FedCFamC2G 5
File number(s): MLG 1487 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 10 January 2024 Catchwords: BANKRUPTCY – application for leave to proceed against the First Respondent in the Supreme Court of Victoria pursuant to s.58(3) of the Bankruptcy Act 1966 (Cth) – application allowed. Legislation: Bankruptcy Act 1966 (Cth) ss. 53, 58, 82, 117 Cases cited: Allanson v Midland Credit Ltd (1977) 30 FLR 108; [1977] FCA 66
Coventry v Charter Pacific Corporation Limited (2005) 227 CLR 234
GFIN Pty Limited v Gooden, in the matter of GFIN Pty Limited (No 2) [2020] FCA 1440
Lovell v Penkin, in the matter of the bankrupt estate of Kevin Michael Penkin (2008) 101 ALD 335; [2008] FCA 637
Nelson v Thompson [2021] FCA 1055
Talacko v Bennett [2017] HCA 15
Division: Division 2 General Federal Law Number of paragraphs: 23 Date of last submission/s: 8 January 2024 Date of hearing: 12 December 2023 Place: Melbourne Counsel for the Applicant: Mr J Levine Solicitor for the Applicant: Maciel Pizzorno & Co Solicitor for the Respondents: No appearance ORDERS
MLG 1487 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF IN THE MATTER OF JOHN MICHAEL VOITIN, BANKRUPT
BETWEEN: MR ATHANASIOS GOURAS
Applicant
AND: MR JOHN MICHAEL VOITIN
First Respondent
PAUL ANTHONY ALLEN IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF JOHN MICHAEL VOITIN
Second Respondent
ORDER MADE BY:
JUDGE MANSINI
DATE OF ORDER:
10 JANUARY 2024
THE COURT ORDERS THAT:
1.To the extent necessary, the Applicant have leave to proceed by commencing and/or taking a fresh step as against the First Respondent in the Supreme Court of Victoria proceeding no. S ECI 2021 03605.
2.There be no order as to costs.
3.By 4.00 pm on 17 January 2024, the Applicant is to serve a copy of these orders and written reasons for judgment delivered on 10 January 2024 on the First Respondent and the Second Respondent.
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 Mansini
IN SUMMARY
Before the Court is an application for the Applicant as creditor to have leave to proceed as against the First Respondent in the Supreme Court of Victoria, in respect of a provable debt and after the First Respondent debtor became a bankrupt pursuant to s.53 of the Bankruptcy Act 1966 (Cth) (Act).
The matter involves the following parties or persons:
(a)Mr Athanasios Gouras is the Applicant to these proceedings and has sought to initiate proceedings in the common law division of the Supreme Court of Victoria (No. S ECI 2021 03605) (Supreme Court claim);
(b)Mr John Michael Voitin is the First Respondent and one of three named defendants in the Supreme Court proceedings, the former legal advisor to the Applicant and was declared bankrupt on 4 June 2020 before the Supreme Court proceedings were commenced (and with such bankrupt status being undischarged as of the most recent search before the Court dated 8 December 2023);
(c)Mr Paul Anthony Allen of PKF Melbourne is the Second Respondent and Mr Voitin’s trustee in bankruptcy; and
(d)Stanton Grant Legal Pty Ltd is Mr Voitin’s former legal practice and another defendant named in the Supreme Court proceedings.
In the Supreme Court claim, Mr Gouras has made a series of allegations against Mr Voitin in relation to a since failed investment scheme involving the sale of leases. In summary, pleaded as alleged:
(a)Breach of contracts for legal services;
(b)Negligence in relation to legal advices provided; and
(c)Breach of various fiduciary duty(ies).
Mr Voitin’s former legal practice is also named as respondent to the Supreme Court claim.
On account of Mr Voitin’s extant bankruptcy and by operation of s.58(3) of the Act, Mr Gouras brought this proceeding seeking leave to commence or take a fresh step as against Mr Voitin in the Supreme Court claim. Mr Gouras proceeds in this jurisdiction on the basis that Mr Voitin was at all relevant times an Australian Legal Practitioner practising in the State of Victoria and covered by the Legal Practitioners Liability committee insurance policy.
These reasons explain the decision to make orders that Mr Gouras have leave to proceed in the Supreme Court claim pursuant to s.58(3) of the Act.
STATUTORY FRAMEWORK
By Division 4 of the Act, and specifically s.58, the property of a debtor who becomes bankrupt (not being after-acquired property) vests in the official trustee. Relevantly, sub-section (3) provides:
(3)Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor:
(a)to enforce any remedy against the person or the property of the bankrupt in respect of a provable debt; or
(b)except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding.
Whether a debt is provable is defined by ss.82(1) and (2) of the Act which in turn provide:
(1)Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at that date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.
[…]
(2)Demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust are not provable in bankruptcy.
Section 117 of the Act provides that a bankrupt’s right to indemnity under an insurance policy (who was insured against liability to third parties) vests in the trustee and any amount received by the trustee from the insurer under the policy in respect of the liability shall be passed on to the third party to whom the liability was incurred.
In Talacko v Bennett [2017] HCA 15 at [35], the High Court of Australia explained the scheme in the following way:
“An essential feature of any modern system of bankruptcy law is that provision is made for the appropriation of the assets of the debtor and their equitable distribution amongst his creditors”: Storey v Lane (1981) 147 CLR 549 at 556 (Storey); [1981] HCA 47. See also Re McMaster; Ex parte McMaster (1991) 33 FCR 70 at 72‑73. The Bankruptcy Act implements such a system. The Bankruptcy Act includes provisions “to stop individual action by creditors for the purpose of obtaining payment of the debts due to them when the aim of the law is to secure administration of the debtor's assets in the interest of the creditors generally”: Storey at 557. Such provisions are necessary “to prevent one creditor obtaining an undue advantage over the others, and to prevent the scheme of the [Bankruptcy Act] from being defeated”: Storey at 557. Section 58(3) is one of those provisions: Piccone v Suncorp Metway Insurance Ltd (2005) 148 FCR 437 at 440 [11].
Section 58(3) operates in aid of s.58(1) to ensure that the property of the bankrupt which has vested in the Official Trustee, so as to be available for distribution to creditors in accordance with the other provisions of the Act, is not depleted to the advantage of individual creditors and the disadvantage of creditors generally.
CONSIDERATION
Mr Gouras was involved in an investment scheme and, relatedly, party to a series of agreements.
In the Supreme Court claim, Mr Gouras variously alleges that Mr Voitin breached obligations owed to Mr Gouras. The pleadings are detailed and not necessary to extract in full here. In summary:
(a)Before Mr Voitin practised with Stanton Grant Legal:
(i)Breach of contract when Mr Voitin did not meet his obligations pursuant to a partly oral and partly implied retainer to provide legal services to him and act on his behalf in relation to a scheme for the sale of a portion of leases of land in Vanuatu referred to as “the Whitesand land” and “the Whitesand leases”.
(ii)In negligence for breach of duty of care in circumstances where Mr Gouras had relied on the professional expertise and skill of Mr Voitin, Mr Voitin knew or ought to have known that Mr Gouras so relied and would suffer loss and damage if not advised in a competent manner and to a professional standard and where Mr Voitin failed to inform Mr Gouras of critical factors said to be within the scope of his professional expertise and skill.
(iii)Breach of fiduciary duty(ies) including (but not limited to) failing to act in good faith, to act in the best interests of Mr Gouras, to make full disclosure, to not improperly use his position or powers to gain an advantage for himself or someone else and to avoid a conflict of interest.
(b)When Mr Voitin practised with Stanton Grant Legal:
(i)Breach of contract when Mr Voitin (and/or Stanton Grant Legal) did not meet their obligations pursuant to a retainer to provide legal services to him and act on his behalf in relation to the structure of the Gouras assets and a loan referred to as “the Dinh loan”.
(ii)In negligence related to advice on the asset structure, the Dinh loan and various other matters.
(iii)Breach of fiduciary duty(ies) including (but not limited to) failing to disclose a conflict of interest and failing to comply with instructions.
By the Supreme Court claim, it is apparent that Mr Gouras is a person who claims to be owed obligations by Mr Voitin and or in the alternative by others (namely the 2 other defendants to the Supreme Court claim). Further, Mr Gouras is not the only person to whom it is alleged obligations were owed. For present purposes it is sufficient that Mr Gouras seeks to pursue Mr Voitin who remains an undischarged bankrupt and one of three defendants named therein.
As the Supreme Court claim was initiated after Mr Voitin became a bankrupt, leave of this Court is required in relation to that which relates to a “provable debt”.
Since the present application was lodged in this jurisdiction, by which such leave was sought pursuant to s.58(3) of the Act, considerable lengths were taken to identify the whereabouts of Mr Voitin as to attend to service and substituted service and substantial opportunity was afforded for his participation but at no time did he participate. The Trustee did not consent to or oppose the application and was granted leave to be excused from these proceedings.
There is a degree of uncertainty about whether or the extent to which the Supreme Court claim relates to a “provable debt” within the meaning of s.82 of the Act. Counsel for Mr Gouras submitted that the claims in the Supreme Court claim are in the nature of liquidated damages. Further, that all categories of the Supreme Court claim are attended with uncertainty in relation to the question of whether they are a “provable debt” in accordance with the Act (most doubtful to the extent that the claims are in negligence) but invited the Court to find in favour of the proposition that leave is required in each case.
Counsel for Mr Gouras tabled the pleadings in the Supreme Court claim and took the Court to some authority on the above-mentioned propositions: Lovell v Penkin, in the matter of the bankrupt estate of Kevin Michael Penkin (2008) 101 ALD 335; [2008] FCA 637 (Lovell); Coventry v Charter Pacific Corporation Limited (2005) 227 CLR 234; Nelson v Thompson [2021] FCA 1055; Allanson v Midland Credit Ltd (1977) 30 FLR 108, 115; [1977] FCA 66 (Allanson); GFIN Pty Limited v Gooden, in the matter of GFIN Pty Limited (No 2) [2020] FCA 1440. However, as Mr Voitin did not participate in these proceedings and the Trustee did not consent or oppose, the Court did not have the benefit of any argument as to these matters. The material was lacking in sufficient detail to determine those complex issues of fact and law as to resolve whether the claims constitute a “provable debt”.
Having regard to the complexity of the issues, the absence of any opposition and that it is most desirable that the claim be resolved if possible in the Supreme Court of Victoria, I consider this an appropriate case to exercise the discretion on the basis that leave is necessary rather than prolong the proceedings and the cost to Mr Gouras of the exercise of conclusively determining whether the need for leave has arisen: Allanson at [114] per Lovell at [15].
Notably Mr Gouras continues in pursuit of the Supreme Court claim on the belief that Mr Voitin held, as all legal practitioners are required to do, a certificate of compulsory professional indemnity insurance in respect of the claims. In the event Mr Voitin was so insured, then s.117 of the Act would operate so that the benefit of the insurance cover would still be received by Mr Gouras rather than the bankrupt estate. Mr Gouras’ belief that such insurance was held at all relevant times is based on a discussion between his lawyer and the lawyer for the Legal Practitioners’ Liability Committee (LPLC) about which there was an affidavit before the Court, but does not appear to have any strong(er) evidentiary basis. By that same conversation, the LPLC was anticipated to appear in the Supreme Court claim in the event that leave of this Court was granted as sought in these proceedings. In any event, Counsel for Mr Gouras submitted to the Court that there should be no cause for concern as to the interests of the Trustee or the creditors of Mr Voitin’s bankrupt estate being adversely affected because the intention was to pursue only the LPLC. An undertaking to this effect was requested by the Court at final hearing and was subsequently forthcoming in the following terms:
I, Athanasios Gouras (Applicant) of [address omitted], medical doctor HEREBY UNDERTAKE to the Federal Circuit Court and Family Court of Australia (Division 2) to seek recovery of any damages, compensation or loss that is ordered in Supreme Court of Victoria proceeding No. S ECI 2021 03605 (Supreme Court proceeding) against the insurance policy of John Michael Voitin (First Respondent) and to undertake to be restrained from making any claim for a provable debt against the bankrupt estate of John Michael Voitin in relation to the Supreme Court proceeding.
I have made this undertaking after having the benefit of legal advice, that an undertaking is a solemn promise to the Federal Circuit Court and Family Court of Australia (Division 2) that is binding upon me, and that any breach of an undertaking can be viewed as being equivalent to breaching a court order and is punishable by way of a fine, imprisonment, and an indemnity costs order.
The undertaking of Mr Gouras was not opposed and sufficiently allays any concern that creditors of the bankrupt estate of Mr Voitin or the Trustee will be adversely affected by such order.
RESOLUTION
For the above reasons, to the extent such leave is necessary by reason of s.58(3) of the Act, I will order that Mr Gouras have leave to proceed against Mr Voitin in the proceedings earlier defined as the Supreme Court claim.
Costs were properly not sought and there will be no order as to costs.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 10 January 2024
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