Pitman v Johnson
[2017] FCA 945
•17 August 2017
FEDERAL COURT OF AUSTRALIA
Pitman v Johnson [2017] FCA 945
File number: SAD 15 of 2016 Judge: CHARLESWORTH J Date of judgment: 17 August 2017 Catchwords: BANKRUPTCY – trustee of the estate of a bankrupt in possession of goods by the execution of warrants issued under s 130 of the Bankruptcy Act 1966 (Cth) – applicants claim to be trustees of a trust and owners of the goods in that capacity – documents relied upon by applicants inadmissible under s 22 of the Stamp Duties Act 1923 (SA)
EVIDENCE – application of State law providing for admissibility of documents to depend upon whether stamp duty has been paid – State law binding on Court exercising federal jurisdiction – interrelation between s 56 and s 9(3)(b) of the Evidence Act 1995 (Cth) and s 79 of the Judiciary Act 1903 (Cth)
PRACTICE AND PROCEDURE – where applicants’ case depended upon admissibility of documents dutiable under the Stamp Duties Act 1923 (SA) – whether adjournment should be granted to enable the documents to be assessed and stamped – whether rulings on admissibility should otherwise be deferred — applicants on notice of opposition to tender – applicants assuming risk documents may not be admitted – adjournment refused – rulings not deferred
Legislation: Bankruptcy Act 1966 (Cth), ss 54, 58, 116, 120, 121, 130
Evidence Act 1995 (Cth), ss 4, 9, 56
Federal Circuit Court of Australia Act 1999 (Cth), s 16
Federal Court of Australia Act 1976 (Cth), ss 21, 37M
Judiciary Act 1903 (Cth), s 79
Stamp Duties Act 1923 (SA), ss 2, 4, 20, 21, 22, 60, 71, Sch 2
Statutes Amendment (Budget 2005) Act 2005 (SA)
Cases cited: Rizeq v Western Australia [2017] HCA 23, (2017) 91 ALJR 707 Date of hearing: 17 and 18 October 2016 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 118 Counsel for the Applicants: Mr N Strawbridge Counsel for the Respondent: Mr M Douglas Solicitor for the Respondent: O’Loughlins Lawyers ORDERS
SAD 15 of 2016 BETWEEN: PHILIP JOHN PITMAN
First Applicant
DEAN CLIFT
Second Applicant
DOROTHEA TOMAZOS
Third Applicant
AND: GREGG ROBERTSON JOHNSON AS TRUSTEE OF THE BANKRUPT ESTATE OF SOTIRIOS PORTELLOS
Respondent
JUDGE:
CHARLESWORTH J
DATE OF ORDER:
17 AUGUST 2017
THE COURT ORDERS THAT:
1.The application is dismissed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
CHARLESWORTH J:
INTRODUCTION
The applicants commenced this action in their asserted capacities as trustees of the Andamooka Opal Stone Unit Trust. In that asserted capacity, they claim to be the owners of a large quantity of rough opalised sandstone (Rough Opal).
The respondent became the registered trustee of the bankrupt estate of Sotirios Portellos on 22 May 2012. In that capacity, he has taken possession of the Rough Opal by the execution of two warrants for the seizure of property issued pursuant to s 130(2) of the Bankruptcy Act 1966 (Cth).
The applicants seek declaratory and other relief founded on or ancillary to their claim that they are the legal owners of the Rough Opal.
The applicants have not established that they are the owners. Accordingly, the application should be dismissed.
PRIOR PROCEEDINGS
The Rough Opal is stored at a facility in Cavan in South Australia. Ownership or management of the storage facility has changed hands at least twice. Over time, it has operated under the business names Chubb, Recall and Iron Mountain. I will refer to it as the Recall facility. Since seizing the Rough Opal at the Recall facility, Mr Johnson has caused it to be stored there in accounts held in his name.
The Rough Opal is stored on pallets, each of which has been ascribed a number in Recall’s records. In these reasons I will refer to each pallet by the last two digits of the pallet number. There are eight pallets, numbered 74 through to 81.
The warrants for seizure were issued by two Federal Circuit Court Judges on Mr Johnson’s application under s 130(1) of the Bankruptcy Act. It provides:
(1)The trustee of a bankrupt’s estate may apply to an eligible judge for the issue of a warrant under subsection (2) if the trustee has reasonable grounds for suspecting that there is on or in any premises property (in this section called relevant property), being:
(a)any of the property of the bankrupt;
(b)property that may be connected with, or related to, the bankrupt’s examinable affairs; or
(c)books (including books of an associated entity of the bankrupt) relevant to any of the bankrupt’s examinable affairs.
The warrants were issued on 25 November 2013 (in relation to pallets 74, 75, 79 and 80) and 12 September 2014 (in relation to pallets 76, 77, 78 and 81). They were obtained ex parte. The applicants did not become aware of the existence or execution of the warrants until late 2014.
As can be seen, to obtain the warrants it was not necessary for Mr Johnson to establish conclusively that the property forming the subject of the warrants was in fact the property of the bankrupt that has vested in him as trustee of the bankrupt’s estate. It is enough to show that the trustee has reasonable grounds for suspecting that the property falls within any one of the descriptions given in subs 130(1)(a), (b) or (c).
When the applicants learned of the seizure of the Rough Opal, they commenced proceedings in the Federal Circuit Court of Australia (FCC) seeking orders to the effect that the warrants issued by the eligible judges be set aside. In the same proceeding, they sought a declaration to the effect that they were the owners of the Rough Opal in their alleged capacities as trustees of the Andamooka Opal Stone Unit Trust. This Court was informed that a judge of the FCC dismissed that application on the basis that it had not been commenced in the appropriate forum, although no reasons for judgment were provided.
The dismissal of the application is understandable having regard to the circumstance that the issue of a warrant under s 130(2) of the Bankruptcy Act is not a judicial act but the act of an eligible judge acting persona designata. It is nonetheless unclear why the FCC refused to entertain the applicants’ associated application for declaratory relief: see s 16 of the Federal Circuit Court of Australia Act 1999 (Cth). In any event, that aspect of the application was not determined on its merits and I do not understand Mr Johnson to submit that the application before this Court is incompetent by reason of an application for declaratory relief having first been made in the FCC.
THE PLEADINGS
The relief sought
The applicants seek orders in the original jurisdiction of this Court expressed at [27] — [34] of their Amended Statement of Claim (ASOC) in the following terms:
27.The setting aside of the Order of His Honour Judge Lindsay of the Federal Circuit Court.
28.The setting aside of the Order of His Honour Judge Brown of the Federal Circuit Court.
29.An order that the Respondent is not vested with possession, ownership or any other interest whatsoever in the Rough Opal.
30.An order that the Applicants are vested with lawful possession, lawful ownership and any and all residual rights in the Rough Opal.
31.An order that the Respondent acted beyond the scope of his authority by continuing to maintain possession of the Rough Opal after having received information from the Applicant as to its lawful ownership of the Rough Opal.
32. Damages for loss of use of the Rough Opal.
33. Costs.
34. Such other relief as the Court deems fit.
A number of observations should be made about the form of relief from the outset.
The first is that the orders referred to in [27] and [28] of the ASOC are the warrants issued pursuant to s 130(2) of the Bankruptcy Act, each of which has already been executed in accordance with its terms. The applicants did not clearly articulate the jurisdiction that was sought to be invoked by that part of their claim for relief, and they did not run their case on the basis that the low statutory requirements for the issue of the warrants had not been fulfilled. The applicants proceeded on the assumption that proof of their rights of ownership would necessarily result in the warrants being set aside. They have not otherwise applied for an order for the delivery up of the Rough Opal into their possession.
The trial proceeded on the basis that the relief sought in [30] of the ASOC was in the nature of a declaration of right: see s 21 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). If the applicants were entitled to a declaration, it may be that they would be entitled to ancillary relief providing for the delivery up of the Rough Opal into their possession although, as I have said, no such order is expressly sought.
The relief sought in [29] of the ASOC may also be understood as an application for declaratory relief. In my respectful view, the applicants would not have standing to apply for such a declaration if they could not show that they had any interest in the Rough Opal. The interest asserted is that of ownership. That is the only basis upon which the applicants claimed to have a superior right or title to the Rough Opal over the possession presently enjoyed in fact by Mr Johnson.
The relief sought in [31] of the ASOC (assuming it to be a claim for declaratory relief) is also dependent upon the applicants establishing their claim to be the owners of the Rough Opal.
Although Mr Johnson asserts that the Rough Opal was vested in him pursuant to s 116 of the Bankruptcy Act, he made no application for declaratory or other relief founded upon a claim of ownership in this action. It is ultimately unnecessary to determine that question in order to decide the applicants’ claim.
In light of these observations, the applicants’ claim turns entirely upon them establishing that they are the legal owners of the particular chattels presently in Mr Johnson’s possession.
Pleaded facts
The applicants rely upon a series of alleged transactions dating back to 3 May 2000. The pleaded allegations may be summarised in 12 propositions. I will refer to them by the following numbers in the course of these reasons for judgment.
(1)A trust named the Opal World Andamooka Unit Trust was established on 3 May 2000.
(2)The original trustee of that trust was Opal World Andamooka Australia Pty Ltd, a company of which Mr Portellos was the sole director.
(3)The Rough Opal formed part of the assets of that trust.
(4)Units in that trust were issued to persons having an interest in the assets of the trust. The unit holders contributed to the trust fund, including by the transfer of money, the transfer of rough and cut gemstones, the provision of expertise and processes for firing, cutting and polishing.
(5)On 16 October 2005 there was an early distribution of some of the assets of the trust, which included the Rough Opal.
(6)On 15 July 2006 an amendment to the Opal World Andamooka Unit Trust Deed was made to the effect that the trust was no longer the owner of the Rough Opal.
(7)The Andamooka Opal Stone Unit Trust was established on 1 January 2011. Mr Portellos was initially the sole trustee of that trust.
(8)The applicants are presently the trustees of the Andamooka Opal Stone Unit Trust.
(9)Between 1 January 2011 and 14 August 2014, ownership in the Rough Opal was “formally vested” in the Andamooka Opal Stone Unit Trust.
(10)The beneficiaries of the Andamooka Opal Stone Unit Trust have been investing in and otherwise contributing to a business relating to the Rough Opal for about 10 years.
(11)Until 2011, the Rough Opal was stored at the Recall facility pursuant to accounts opened in Mr Portellos’ name.
(12)In 2011, the name of the account holder was changed to Philip J Pitman (the first applicant) as trustee of the Andamooka Opal Stone Unit Trust “in order to facilitate certain business opportunities” which that trust was pursuing.
Mr Johnson put the applicants to proof on all of these allegations, including the assertion that they were validly appointed trustees of the Andamooka Opal Stone Unit Trust.
Counsel for Mr Johnson submitted that the applicants’ pleaded case should be understood as one alleging, or at least attempting to allege, a cause of action founded in the torts of conversion or detinue. The applicants themselves did not clearly articulate the cause of action relied upon.
Whatever the cause of action, I am satisfied that it is within the Court’s jurisdiction to determine the claim for declaratory relief, having regard to Mr Johnson’s possessory title (at least) resulting from the exercise of powers under the Bankruptcy Act and the power of this Court to grant a declaration of right, irrespective of whether ancillary or consequential relief is sought. In the result, it is not necessary to discern the cause of action relied upon in support of the other claims for relief.
RULINGS ON AFFIDAVIT EVIDENCE
The applicants relied on the affidavit of Philip John Pitman sworn on 13 April 2016. Mr Pitman was the only witness called on their case. Mr Portellos was not called. The second and third applicants were said to be overseas. No other participants in the pleaded trust structures or alleged investments or business activities gave evidence.
As filed, Mr Pitman’s affidavit consists of 17 paragraphs and eight annexures marked PP1 to PP8. In the opening paragraphs, Mr Pitman deposed that he was a trustee of the “Adelaide Opal Stone Unit Trust” along with Dorothea Tomazos (the third applicant) and Dean Clift (the second applicant). The name of the trust referred to is not the same as the trust forming the subject matter of evidence and submissions at the trial. The reference to “Adelaide” in the name of the pleaded trust may be assumed to be a typographical error. It should read “Andamooka”.
Mr Pitman deposed to having accessed the books and records of the trust and “the records of other corporate entities”. The other entities were not named. The documents he had accessed were annexed to the affidavit. Mr Pitman went on to refer to a series of transactions involving the Rough Opal consistent with the applicants’ pleaded case. In the closing paragraph of his affidavit, he said “I am able to attest to the facts herein from my own knowledge except where otherwise appears”.
Much of the affidavit was objected to on the ground that Mr Pitman was not able to attest to the facts asserted of his own knowledge, but instead had drawn inferences he considered to be available on the face of the documents he had annexed. Mr Pitman, through his Counsel, acknowledged that some of the facts he had asserted had been relayed to him by his father and that he otherwise relied on the documents as evidencing the facts in issue. I ruled several paragraphs of the affidavit inadmissible on that basis, either in full or in part. Only a small portion of it was read.
The applicants tendered the eight annexures to Mr Pitman’s affidavit as documents that, it was submitted, were admissible in their own right and spoke for themselves. With the exception of annexure PP8, I ruled the documents inadmissible and gave brief reasons for so ruling. I would in any event rule some of the documents inadmissible for reasons in addition to those given at the time of the trial. Given the importance of the documents to the applicants’ case it is appropriate that I give written reasons for these rulings.
RULINGS ON DOCUMENTS
The Evidence Act 1995 (Cth) (EA) applies in these proceedings: EA, s 4(1). Section 9(3)(b) of the EA provides:
(3)For the avoidance of doubt, this Act does not affect a law of a State or Territory so far as the law provides for:
…
(b)the admissibility of a document to depend on whether stamp duty has been paid
Section 22 of the Stamp Duties Act 1923 (SA) (SD Act) is a law of a kind described in s 9(3)(b) of the EA. It is to be read in conjunction with s 21. Together, they provide:
21 Admissibility of unstamped instruments in evidence
Upon the production of any instrument chargeable with duty as evidence in any civil proceedings in any part of South Australia, the officer whose duty it is to read the instrument shall call the attention of the presiding judge, special magistrate or justices to any omission or insufficiency of the stamp thereon.
22 Except as aforesaid no unstamped instrument to be received in evidence
No instrument chargeable with duty executed in any part of South Australia, or relating, wherever it was executed, to any property situated, or to any matter or thing done or to be done, in any part of South Australia, shall, except in criminal proceedings, be pleaded or given in evidence, or admitted to be good, useful or available at law or in equity, unless duly stamped.
It is not within the competence of the Parliament of the State of South Australia to make laws affecting the manner of the exercise of federal jurisdiction: Rizeq v Western Australia [2017] HCA 23; (2017) 91 ALJR 707 at [58] – [63] (Bell, Gageler, Keane, Nettle and Gordon JJ). A law of a State may nonetheless be picked up and applied as a federal law in circumstances where s 79 of the Judiciary Act 1903 (Cth) applies: Rizeq at [16] (Kiefel CJ), [65] (Bell, Gageler, Keane, Nettle and Gordon JJ) and [180] (Edelman J). Section 79 relevantly provides:
State or Territory laws to govern where applicable
(1) The laws of each State … including the laws relating to procedure, evidence, and the competency of witnesses, shall, except as otherwise provided by the Constitution or the laws of the Commonwealth, be binding on all Courts exercising federal jurisdiction in that State or Territory in all cases to which they are applicable.
The admissibility of evidence is governed by Ch 3 of the EA in which s 56 resides. Section 56 is a key provision. It provides:
56Relevant evidence to be admissible
(1)Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding.
(2) Evidence that is not relevant in the proceeding is not admissible.
Section 56 is a general inclusionary rule. Any exceptions to it must be expressly or implicitly provided for by the EA itself. Section s 9(3)(b) of the EA provides an exception insofar as it allows for the operation of certain State laws that govern the admissibility of a document irrespective of its relevance.
Section 79 of the Judiciary Act applies to pick up s 22 of the SD Act as a law that is binding on this Court. The EA does not “otherwise provide” because s 9(3)(b) expressly contemplates the application of State laws that provide for the admissibility of a document to depend on whether stamp duty has been paid. There is otherwise no law of the Commonwealth inconsistent with s 22 of the SD Act within the meaning of s 109 of the Constitution. Accordingly, this Court is bound to apply s 22 of the SD Act in accordance with its terms.
Adjournment application
About 10 days prior to the commencement of the trial, Mr Johnson’s solicitors drew the applicants’ solicitor’s attention to the fact that certain documents annexed to Mr Pitman’s affidavit were not stamped in accordance with the SD Act.
The applicants’ solicitor did not attend to having the documents stamped prior to the commencement of the trial. In submissions concerning the admissibility of the documents, the applicants’ primary submission was that the documents were not chargeable with duty within the meaning of s 22 of the SD Act. The documents were, it was submitted, relevant and therefore admissible.
When the Court foreshadowed a finding that at least some of the documents were dutiable, the applicants submitted that the documents should nonetheless be admitted “provisionally” and a ruling made on their admissibility after the closing of the respondent’s case. They submitted that reservation of judgment in the matter should otherwise be deferred until such time as the applicants could either pay the duty or obtain an opinion from the Commissioner of State Taxation (being the officer responsible for administering the SD Act) that the documents were not chargeable at all. Counsel suggested that the Court should of its own motion telephone the Commissioner for an opinion as to whether the documents were dutiable. The applicants otherwise undertook, through their Counsel, to pay any duty chargeable on the instruments. They accepted that an adjournment of the trial would be necessitated whatever course was taken.
I refused the application for an adjournment, refused to receive the documents “provisionally”, and declined the invitation to obtain an opinion from the Commissioner.
It is for this Court to determine whether the documents are “chargeable with duty” within the meaning of s 22 of the SD Act. That is a question of law to be answered by reference to the terms of the SD Act itself. It does not depend on the opinion or discretion of the Commissioner.
The applicants commenced their claim some months before the commencement of the trial and more than two years after becoming aware that the Rough Opal had been seized by Mr Johnson. They had, in my view, sufficient opportunity to obtain an opinion as to whether the documents were chargeable and to ensure that the person liable to pay the duty attended to its payment. They did not do so, notwithstanding that the subject matter of the trial is a large quantify of minerals which, I infer, is perceived to have sufficient monetary value to justify the commencement of this action.
Furthermore, the person who executed the instruments in question was legally obliged to present the instruments for stamping in the time prescribed by the SD Act, irrespective of any notice given by an opposing party in litigation as to any reliance upon s 22 of the SD Act. Failure to present the instruments for stamping within the prescribed time constitutes a criminal offence: SD Act, s 20(4). Litigants relying upon chargeable instruments may reasonably be expected to prepare for trials with proper regard to s 22 of the SD Act irrespective of whether objection is taken by an opposing party to the admission of any chargeable instrument.
In most instances, the person responsible for presenting the documents for stamping is Mr Portellos. Mr Portellos is no stranger to the applicants. He is intimately connected with the transactions relied upon by them. He is the husband of the third applicant and alleged to have been a co-trustee. His dealings with the Rough Opal are relied upon heavily by the applicants. The applicants’ undertaking that they could and would attend to the payment of any duty chargeable on the instruments supports an inference that it was within their power to ensure that Mr Portellos attend to the presentation of the instruments for stamping prior to the commencement of their action.
At the time of the trial, there was no reliable means to predict the period of time for which an adjournment might be necessary. The calculation of duty payable on the instruments depends upon the value of the property forming the subject of the transaction. Given the nature of the property, and the absence of any specification on the instruments as to its true value, it could not be assumed that the assessment and payment of duty could be attended to in a short time frame.
I am satisfied that the applicants, by their solicitor, were aware that the admissibility of the documents turned on the application of s 22 of the SD Act. The applicants assumed the risk that the instruments were either not chargeable with duty or they otherwise assumed that the documents would be admitted in evidence notwithstanding s 22 of the SD Act or, failing that, that an adjournment would be granted. If the applicants are forensically disadvantaged by the refusal of an adjournment, it is a disadvantage they could and should have avoided.
Moreover, to defer a ruling on the admissibility of the instruments (including by accepting them “provisionally”) would have disadvantaged the respondent in the presentation of his case. The respondent was, I concluded, entitled to open his case knowing in advance the evidentiary case he was required to meet. The manner and extent to which Mr Pitman was cross-examined turned on the question of whether the instruments relied upon by the applicants were or were not admitted in evidence.
In refusing to adopt the various courses urged by the applicants I took into account the apparent importance of the instruments to the presentation and proof of their case. I considered that to be a circumstance resulting from the applicants’ decision to proceed to trial in reliance solely upon Mr Pitman’s affidavit and the documents annexed to it. That they had limited or no alternative means to prove their pleaded allegations was, I concluded, a circumstance of their choosing.
In all of the circumstances, and bearing in mind the considerations specified in s 37M of the FCA Act I ruled on the admissibility of all of the documents tendered by the applicants before the closure of their case on the evidence.
Instruments chargeable with duty
The annexure PP8 was not subject to any objection and was admitted in evidence. It will be necessary to refer to that annexure again in due course. I express no view on its admissibility under the SD Act, primarily because the parties were not heard on that question.
The parties made submissions in relation to the application of s 22 of the SD Act to annexures PP1 to PP7.
I will refer to annexure PP7 as the Transfer Bundle. I ruled the Transfer Bundle inadmissible by virtue of s 22 of the SD Act. I then ruled annexures PP1 to PP6 inadmissible in that, in the absence of the Transfer Bundle, they were not relevant. I did not, at the time of the trial, make any ruling as to the application of the SD Act to the instruments contained in those annexures.
Even if I am wrong in determining annexures PP1 to PP6 to be irrelevant, I would nonetheless rule those documents inadmissible on the basis that they, too, are instruments chargeable with duty that are not duly stamped in accordance with the SD Act. None of what I now say in relation to the application of the SD Act as an alternate basis to rule those documents inadmissible should be understood as detracting from my earlier ruling that the documents are nonetheless inadmissible because they are irrelevant.
The Transfer Bundle
This bundle contains eight documents, each titled “TRANSFER”, two of which are dated 1 January 2011 and six of which are dated 4 August 2011. They are relevant insofar as they assist the applicants to prove proposition (9) referred to in [20] above. Proof of that proposition is critical to the applicants’ case.
The first of the transfers gives a description of the goods purportedly forming the subject of the transfer in the following terms:
THE WHOLE OF THE RIGHT TITLE AND INTEREST IN THE WHOLE OF THE GOODS SET OUT IN AND THE SUBJECT OF SAFE KEEPING RECEIPT (‘SKR’) ISSUED BY RECALL INFORMATION MANAGEMENT PTY LTD TO THE BENEFIT OF THE TRANSFEROR AND BEING MORE PARTICULARLY DESCRIBED THEREIN AS OPAL/ANDAM CONTAINER 5509593881 OF 534.28 Kgs
On its face, this document appears to relate to pallet 81 held at the Recall facility, which forms a part of the subject matter of these proceedings.
Mr Portellos is named as the transferor. The transferee is named as “ANDAMOOKA OPAL STONE UNIT TRUST”. Under the heading “CONSIDERATION” appear the words:
PURSUANT TO A CERTAIN UNIT TRUST DEED ENTERED INTO BY THE TRANSFEROR DATED 1ST JANUARY 2011.
The transfer otherwise purports on its face to effect a transfer of the estate in fee simple of the goods from the transferor to the transferee. It bears two signatures that appear to be of the same person, one under the words “SIGNED by the Transferor SOTIRIOS PORTELLOS” and the other under the heading “EXECUTED by the Transferee ANDAMOOKA OPAL STONE UNIT TRUST PURSUANT TO THE UNIT TRUST DEED in the present of”.
The remaining documents in the Transfer Bundle are materially to the same effect, although the description of the goods subject to the apparent transactions in each case refers to a different safekeeping receipt, container number and prescription of weight. The container numbers specified on the transfers correlate with pallet numbers ascribed to the Rough Opal forming the subject matter of these proceedings. Each of the documents contains, in the description of the goods subject to the transfer, a reference to the weight of the container.
The transfers are attached to documents that appear to be minutes of a “meeting of the trustee” (singular) of the Andamooka Opal Stone Unit Trust, Mr Portellos. Each of those documents records Mr Portellos resolving (alone) to “accept the transfers referred to in the attached Transfer Deeds”. I pause at this juncture to observe that as at 1 January 2011 at 4 pm Ms Tomazos had purportedly been appointed as a co-trustee of the relevant trust (see PP8).
The SD Act applies on its terms as at the date of the transfers. The relevant provisions of the SD Act were not subject to any substantive amendment between 1 January 2011 and 4 August 2011. The SD Act as in force on 1 January 2011 will be referred to in respect of this category of documents.
Section 4 of the SD Act provides:
4 Imposition of stamp duties
(1)Subject to the exemptions contained in Schedule 2 and the other provisions of this Act, the stamp duties specified in that Schedule are charged in respect of the instruments specified in that Schedule.
(2)The parties who executed an instrument are jointly and severally liable to pay the duty charged in respect of the instrument.
The applicants contended that none of the instruments annexed to Mr Pitmans’ affidavit were chargeable with duty because they were each in the nature of a deed. An instrument in the nature of a deed was not, it was submitted, chargeable with duty. Counsel did not point to any particular provision of the SD Act in support of that submission.
Even assuming the instruments in the Transfer Bundle are properly to be regarded as deeds, I reject the submission that they are not dutiable for that reason. As at 1 January 2011 and 4 August 2011 there was no general exemption from the imposition of stamp duty in respect of an instrument merely by virtue of the instrument being in the nature of a deed.
In accordance with cl 4(1) of Sch 2 to the SD Act, a “conveyance operating as a voluntary disposition inter vivos of any property” is chargeable with duty. There is no question that the transactions sought to be proven by the instruments in the Transfer Bundle were voluntary and inter vivos. The issue is whether each instrument is properly to be regarded as a conveyance.
The word “conveyance” is defined in s 60 of the SD Act to include, relevantly:
60 Interpretation
In this Act—
conveyance includes—
(a)every conveyance, assignment, transfer or declaration of trust and every application under the Real Property Act 1886 or the Community Titles Act 1996; and
(b) every decree or order of any court, judge or commissioner; and
(c) every other application or request of any kind; and
(d) every other assurance or instrument of any kind,
by which or by virtue of which or by the operation of which, whether upon registration or otherwise, or by the issue of a certificate of title in pursuance of which, any real or personal property or any estate or interest in any such property is assured to, or vested in, any person, and to convey has a meaning coextensive with the meaning of conveyance, as extended by this section;
conveyance on sale includes—
(a)every conveyance, assignment, transfer or application under the Real Property Act 1886; and
(b) every decree or order of any court, judge or commissioner; and
(c) every other application or request of any kind; and
(d) every other assurance or instrument,
by which or by virtue of which any real or personal property, upon the sale thereof, is legally or equitably transferred to, or vested in, the purchaser or any other person on his behalf or by his direction, and also includes—
(e)every application for a foreclosure order under the Real Property Act 1886; and
(f)every lease for which any consideration other than the rent reserved may be paid or agreed to be paid (but only so far as such consideration is concerned).
The word “transfer” was, at the relevant time, defined in s 2 of the SD Act to mean, in relation to property:
… transfer, assure or vest at law or in equity (whether or not the transfer, assurance or vesting is subject to registration, the issue of a certificate of title or some other similar requirement);
On the applicants’ case, each of the transaction documents in the Transfer Bundle are instruments by virtue of which the Rough Opal or any estate or interest in the Rough Opal (being personal property) was assured to or vested in those persons who were trustees of the Andamooka Opal Stone Unit Trust. Assuming the transactions evidenced by the instruments are genuine, each instrument effects a “conveyance” within the meaning of s 60 of the SD Act and is chargeable with duty as a conveyance operating as a voluntary disposition inter vivos within the meaning of cl 4 of Sch 2 as in force at the relevant times. The applicants’ case relies upon the transfers being good, useful or available at law or in equity within the meaning of s 22 of the SD Act. Accordingly, they cannot be admitted in evidence unless duly stamped.
Distribution Deeds
The annexure marked PP2 contains a bundle of deeds relied upon by the applicants in support of proposition (5) in [20] above. I will refer to them collectively as the Distribution Deeds. They are each dated 16 October 2005. The Recitals to each deed states that Opal World Andamooka Australia Pty Ltd “is the owner of certain raw material held at the facilities of [Chubb, now Recall] in the State of South Australia (the ‘Raw Material’)”.
Assuming the transactions effected by the Distribution Deeds to be genuine, they effect a series of transfers of parcels of “Raw Material” from Opal World Andamooka Australia Pty Ltd as trustee of the Opal World Andamooka Unit Trust to Mr Portellos “for nil or nominal consideration”. Each transfer is by way of an early distribution of a part of the assets of that trust to Mr Portellos by the agreed appointment of an earlier vesting date.
The parcels are described in the Distribution Deeds by prescriptions of weight. The prescriptions of weight align with the weights of the containers referred to in the documents contained in the Transfer Bundle.
As at 16 October 2005, a conveyance operating as a voluntary disposition inter vivos was chargeable with duty: see s 4 of the SD Act and cl 4 of Sch 2 as in force at that time. The definition of a “conveyance” in s 60 of the SD Act, as then in force, was materially the same as the definition as in force at 1 January 2011 (extracted above at [64]) as was the definition of a “transfer” in s 2 (extracted above at [65]). Each of the Distribution Deeds is a conveyance operating as a voluntary disposition inter vivos and is chargeable with duty. There are no exemptions in the SD Act that would apply. As the Distribution Deeds are relied on as being good, useful or available at law or in equity within the meaning of s 22 of the SD Act, they are not admissible unless duly stamped.
Other dutiable instruments
Annexure PP1 is an indenture, executed as a deed, establishing the Opal World Andamooka Unit Trust made on 3 May 2000. It is an instrument chargeable with duty in accordance with the SD Act as then in force because it operates to vest the assets of the trust in the original trustee(s). It is a conveyance operating as a voluntary disposition inter vivos within the meaning of Sch 2 to the SD Act as in force at that time. Schedule 2 makes it clear that a conveyance includes a transfer of an interest in property to a person who takes as a trustee, subject to some exceptions (none of which apply).
If I am wrong in that conclusion I would nonetheless conclude that the instrument is dutiable in accordance with Sch 2 to the SD Act as then in force because it is a “Deed or transfer of any kind not otherwise specified in” Sch 2. Those words appeared in Sch 2 to the SD Act (later as cl 8) until their repeal by the Statutes Amendment (Budget 2005) Act 2005 (SA), which came into operation on 1 July 2006. Clause 8 of Sch 2 or its statutory predecessors, would, I should add, provide an alternative basis for finding that the 2005 Distribution Deeds were chargeable with duty.
Annexure PP2 also contains a document dated 16 October 2005 titled “CONFIDENTIAL INFORMATION CONFIRMATION BENEFICIAL OWNERSHIP”. On its face it appears to be a document executed by Mr Portellos evidencing or constituting an agreement that he hold on trust the beneficial interest in the same raw material referred to in the Distribution Deeds for 20 individuals (including himself) in specified percentages. The document depends for its relevance on the admission into evidence of the Distribution Deeds because there is otherwise no evidence connecting the raw material referred to in the document to the Rough Opal forming the subject matter of the proceedings. Even assuming the document to be relevant, it is nonetheless inadmissible because it is properly regarded as a “declaration of trust” within the meaning of para (a) or an “assurance ... of any kind” within the meaning of para (b) of the definition of the word “conveyance” in s 60 of the SD Act as then in force. It is a conveyance operating as a voluntary disposition inter vivos as defined in cl 4 to Sch 2 and is chargeable with duty.
Annexure PP3 is an instrument dated 15 July 2006 titled “DEED OF AMENDMENT OF INDENTURE AND APPOINTMENT OF ADDITIONAL TRUSTEE”. By that date, Sch 2 to the SD Act no longer provided for the charging of duty on an instrument merely by virtue of the instrument being in the nature of a Deed.
The document purports to effect the appointment of Dorothea Tomazos as an additional trustee of the original trust and expressly provides that any estate or interest of property subject to the trust shall also vest in her. The instrument is for that reason a conveyance operating as a voluntary disposition inter vivos and is chargeable with duty for that reason. Ms Tomazos’ status as a trustee of that earlier trust would not appear to be relevant to any issue arising in the proceedings in any event.
Annexure PP4 is a deed establishing the Andamooka Opal Stone Unit Trust made on 1 January 2011. Annexure PP5 contains a document titled “Supplemental Deed of Andamooka Opal Stone Unit Trust” bearing the same date. Clause 2 of the second-mentioned document effects amendments to the first-mentioned document. The two documents are to be read as an instrument by which a trust is established and a trust fund constituted. The trust fund is defined to include an initial sum of $50 paid by the founder to the trustee, together with (relevantly) all moneys, investments and property paid or transferred to and accepted by the trustee as additions. The instrument is dutiable because it has the effect of vesting trust property in the trustees of the trust. For completeness, I should add that the instrument is not dutiable merely because it is in the nature of a deed. As at 1 January 2011, Pt 2 of Sch 2 to the SD Act contained cl 16(30), which exempted from the stamp duty an instrument being “a deed or transfer of a kind for which no specific charge, or basis for charging duty, is fixed by this Schedule”. The transfer of 1 January 2011 was of a kind for which a basis for charging duty was fixed by Sch 2, at least by reference to the value of the original trust property.
Annexure PP6 is a document titled “SOTIRIOS PORTELLOS AS TRUSTEE FOR ANDAMOOKA OPAL STONE UNIT TRUST MINUTES OF MEETING OF TRUSTEE” dated 1 January 2011. It records Mr Portellos (being the only person present) resolving to appoint Dorothea Tomazos as a new trustee and issuing additional units in accordance with the trust deed. The document does not, of itself, establish that the trust property includes the Rough Opal forming the subject matter of the proceedings. Together with PP8, the document may nonetheless be relevant to prove the proposition that the third applicant, Ms Tomazos, is a trustee of the trust. Standing alone, it is insufficient to prove the validity of her appointment. In my view, very little turns on the admissibility of this document. If it is relevant, it is nonetheless irrelevant because it operates to vest in Ms Tomazos the trust property and is, for that reason, chargeable with duty.
Section 71 of the SD Act
In respect of the documents constituting the trusts, Counsel for Mr Johnson relied on s 71(3) of the SD Act. As at 1 January 2011, it relevantly provided:
(3)For the purposes of this Act, the following instruments shall, subject to this section, be deemed to be conveyances operating as voluntary dispositions inter vivos:
(a)an instrument to which subsection (4) applies effecting or acknowledging, evidencing or recording, any of the following transactions:
(i)a transfer of property to a person who takes as trustee; or
(ii)a declaration of trust; or
(iii)the creation of an interest in property subject to a trust; or
(iv)a transfer of an interest in property subject to a trust; or
(v)the surrender or renunciation of an interest in property subject to a trust; or
(vi)the redemption, cancellation or extinguishment of an interest in property subject to a trust,
whether or not any consideration is given for the transaction; or
(b)an instrument to which paragraph (a) does not apply, being a conveyance that is not chargeable with duty as a conveyance on sale.
(4)This subsection applies to any instrument that relates to land, a financial product or a unit under a unit trust scheme, or an interest in land, a financial product or a unit under a unit trust scheme.
…
(4b) For the purposes of this Act (other than Part 4)—
(a)property is taken to be held beneficially by a unit trust scheme if it is held by the trustees of the scheme in trust for the unitholders; and
(b)the holder of a unit in a unit trust scheme that is taken under paragraph (a) to hold property beneficially is taken to have a beneficial interest in that property; and
(c)the transfer, creation, surrender, renunciation, redemption, cancellation or extinguishment of a unit in a unit trust scheme that is taken under paragraph (a) to hold property beneficially is taken to be a transfer, creation, surrender, renunciation, redemption, cancellation or extinguishment (as appropriate) of a beneficial interest in that property.
(emphasis added)
As at 1 January 2011 a unit trust scheme was defined in s 2 of the SD Act as follows:
unit trust scheme means an arrangement made for the purpose, or having the effect, of providing for persons having funds available for investment facilities for the participation by them, as beneficiaries under a trust, in any profits or income arising from the acquisition, holding, management or disposal of any property subject to the trust;
Counsel for the applicants submitted that the instruments were not dutiable in accordance with s 71(3) because each trust in issue was a “bare unit trust” and not a “unit trust scheme”.
The conclusion that the arrangement established by PP4 and PP5 is a unit trust scheme is consistent with the pleaded allegations, particularly proposition (10) in [20] above, and with this assertion in Mr Pitman’s affidavit at [16] as amended and read:
All my activities, … in relation to the rough opal since October 2005 have been undertaken as trustee for the Beneficiaries who have all invested in the business of the trust.
If I am wrong in determining the instruments effectuating the establishment of the trusts and the issuing of units to the unit holders are chargeable with duty for the reasons already given, I would accept the respondent’s submission that they are dutiable as instruments relating to units in a unit trust scheme having the effect of effecting, acknowledging, evidencing or recording a transfer of property to a person who takes as trustee (s 71(3)(a)(i)) or declaration of a trust (s 71(3)(a)(ii)) or the creation of an interest in property subject to a trust (s 71(3)(a)(iii)). They are deemed to be instruments operating as a voluntary disposition inter vivos under s 71(3) of the SD Act and are thereby chargeable with duty.
Relevance
As I have mentioned, the documents in the Transfer Bundle appear to record transactions relating to the same property forming the subject matter of these proceedings. My ruling the Transfer Bundle inadmissible at trial, notwithstanding its relevance, had consequences for the admissibility of other documents under s 56 of the EA. As I have said, the weight of the “goods” referred to in the transfers aligns with the weights ascribed to each distributed parcel of raw material specified in the Distribution Deeds. Apart from the coincidence in weight, the Distribution Deeds do not, of themselves, identify whether the asset distributed is the same Rough Opal forming the subject matter of the proceedings. The applicants did not call any witness who could attest of his or her own knowledge the particular property to which the Distribution Deeds related. That is important because it forms a part of the applicants’ case that the Rough Opal is not the only mineralised material in which Mr Portellos had interests or dealings in whatever capacity. It was for these reasons that, in the course of the trial, I determined that the relevance of the Distribution Deeds depended upon the admission into evidence of the Transfer Bundle. I would, as I have said, rule the documents inadmissible for the additional reason that they are precluded from admission by s 22 of the SD Act in any event.
The relevance of the remaining documents fell to be assessed without reference to the Distribution Deeds and the Transfer Bundle.
Save for the annexure marked PP8, the tender of which was not objected to, the remaining documents do not tend to prove (whether considered alone or together) that the applicants are the owners of the same property that forms the subject matter of these proceedings. Insofar as the documents might otherwise have been relevant to prove the appointment of the applicants as trustees of the Andamooka Opal Stone Unit Trust, the instruments were inadmissible by virtue of s 22 of the SD Act.
The documents in annexure PP8 are a bundle of minutes of meetings of the trustee or trustees from time to time of the Andamooka Opal Stone Unit Trust. As I have mentioned, no objection was made to its admission into evidence by reference to the terms of the SD Act and it was not ruled inadmissible at trial.
The success of the applicants’ case does not turn on the admission of that document into evidence. Even if the applicants could prove their status as trustees of the Andamooka Opal Stone Unit Trust, that circumstance would not be sufficient to prove their ownership in that capacity of the Rough Opal. In analysing the evidence as a whole, I will assume (without deciding) that the applicants are the trustees of the Andamooka Opal Stone Unit Trust. Annexure PP8 furnishes some evidence of that status, although the validity of the appointments cannot be discerned from the face of the documents contained in annexure PP8, considered in isolation. Without reference to the instrument establishing the relevant trust the documents in PP8 are to be given little weight. They evidence purported relations, decisions and dealings the validity of which depends on the terms of the trust, which are not in evidence.
Assuming that Mr Portellos’ status as an original trustee of the Andamooka Opal Stone Unit Trust can be proven (see proposition (7) at [20] at above), it was not suggested that he was removed as trustee at any time.
THE RESPONDENT’S CASE
In his defence, Mr Johnson alleged (among other things) that the Rough Opal was owned by Mr Portellos in his personal capacity at all material times prior to his bankruptcy. From 29 February 2016, Mr Johnson pleaded particulars of the documents upon which he relied (defence at [8]). The documents were subsequently annexed to an affidavit sworn by Mr Johnson on 1 June 2016, filed and served more than two months in advance of the trial.
The applicants did not file a reply. Mr Pitman made no reference in his affidavit to the documents particularised by Mr Johnson. No affidavits in reply to that filed by Mr Johnson were otherwise relied upon by the applicants. No objection was made by the applicants to the Court reading the whole of Mr Johnson’s affidavit, including the annexures.
For the reasons that follow, the annexures to Mr Johnson’s affidavit significantly undermine the applicants’ case.
Prior to obtaining the warrants for the seizure of the Rough Opal, Mr Johnson wrote to personnel at Recall advising them of Mr Portellos’ bankruptcy. He stated that he understood that Recall held property of Mr Portellos or certain associated entities and gave a Recall reference number RL 550628. He asked Recall to provide information in connection with that reference number. Recall has provided Mr Johnson with a series of unpaid invoices issued to Mr Portellos as the customer. There is no reference on the invoices to the existence of any trust or Mr Portellos’ status as a trustee.
Mr Portellos provided a signed statement of affairs to the respondent on 8 June 2012 in the discharge or purported discharge of his obligation under s 54 of the Bankruptcy Act. An unsigned copy was annexed to Mr Johnson’s affidavit and a signed copy tendered at the hearing.
The form for the statement of affairs required Mr Portellos to state whether he had, in the past five years, operated a business via a company or a trust, or been a unit holder or beneficiary of a trust.
In response, Mr Portellos declared his involvement in the Opal World Andamooka Trust “trading as Opalworld [sic] Andamooka Australia Pty Ltd”. That is the original trust established in May 2000. It is not alleged by the applicants that the Rough Opal forming the subject matter of these proceedings presently forms any part of the property of that trust. In his statement of affairs, Mr Portellos declared that that trust owns “stock on hand” of $767,337.00 and intellectual property rights in a “polishing formula” said to be valued at $23,250,000.00. He declared that he had earned an income from a business operated by Opal World Andamooka Australia Pty Ltd of $350,000.00 over the previous 12 months in his capacity as a director and secretary of that company which he declared to be a trustee company. He declared that he was the owner of all of the shares in Opal World Andamooka Australia Pty Ltd and that he was the owner of a “gemstone collection” with a market value of $2,600,000.00.
I cannot conclude on the state of the evidence whether the gemstone collection referred to in the statement of affairs is or is not the Rough Opal forming the subject matter of these proceedings. The respondent himself has acknowledged that the collection may well be a number of polished gemstones currently held in a bank safety deposit box which he has inspected.
On the applicants’ case, the beneficiaries of the trust, have, it is pleaded, funded a business relating to the Rough Opal for 10 years and the trust was established “in order to secure the necessary funding for the development of the business”. The pleaded case is that the trust operated a business for the benefit of the unit holders and in 2011 Mr Portellos transferred the Recall accounts into Mr Pitman’s name “in order to facilitate certain business opportunities which [the trust] was pursuing”. However, Mr Portellos did not, in his statement of affairs, declare any involvement in a business operated via the Andamooka Opal Stone Unit Trust. Indeed, there is no reference at all to that trust in the statement of affairs. Insofar as the documents in PP8 evidence Mr Portellos’ status as a unit holder in the trust, that status is not declared by Mr Portellos. There is no evidence before the Court capable of explaining this curious omission in the statement of affairs, particularly in relation to the alleged business activities of the trust, all of which occurred whilst Mr Portellos was a trustee. The omission is difficult to reconcile with the applicants’ pleaded case.
I have not overlooked that a signed and complete copy of the statement of affairs was not annexed to Mr Johnson’s affidavit but was instead tendered in the course of the trial. The applicants did not object to the tender of the document, nor did they seek an adjournment of the trial to consider its implications for their case.
Mr Johnson deposed to having received from one of Mr Portellos’ creditors a document titled “JTI DIAMOND CO CERTIFIED APPRAISAL”. I will refer to it as the Turner Appraisal. It appears on its face to be a valuation obtained on 25 October 2011 concerning the contents of pallet 74. The material on that pallet is said to weigh 201.24 kg. Under the heading “APPRAISED VALUE” there appears the words “WHOLESALE REPLACEMENT VALUE: $221,364,000.00 US”. There is, as a part of the Turner Appraisal, a “FINAL REPORT” dated 28 October 2011, signed by one Jim Turner. It relevantly states:
Background:
Mr Sotiri Portellos initially approached my company to perform an independent valuation on a collection of rough cut opals that he had assembled over a period of time.
…
I agreed to travel to South Australia to perform an independent valuation of the collection of select fine quality opal rough. The valuation process has taken place at a storage facility (Recall) in South Australia.
I initially met with Mr Sotiri Portellos and Mr Steve McNamara of Commercial & General Law (A South Australian Law Firm) to establish proof of Ownership for the Collection. Documentation was produced that proved ownership for Mr Sotiri Portellos. All valuations are made out in favour of Mr Sotiri Potellos.
There is no reference in the valuation to the existence of any trust.
Recall has provided Mr Johnson with email correspondence which, I infer, relates to preparations for the conduct of the appraisal. The email is from Mr Portellos’ solicitor, Mr McNamara and is dated 11 October 2011. It relevantly states:
I refer to previous inspections of our client’s stored product at your Cavan SA site, arranged through your good self.
Our client requires to arrange a further inspection of the 8 pallets on Friday the 14th October 2011 at any time after noon. Our client has a number of overseas dignitaries who require to inspect the items.
(emphasis added)
The solicitor makes no reference to acting for any person or entity other than Mr Portellos. Mr McNamara was not called by any party to explain the capacity in which the client retained him. It is clear, however, that Mr McNamara purported to act for a single person, Mr Portellos. Mr Pitman was, on the applicants’ case, a co-trustee of the Andamooka Opal Stone Unit Trust at the time that the appraisal was arranged.
I do not receive the Turner Appraisal in evidence for the purpose of acting upon Mr Turner’s opinion as to the value of the material, nor to prove the objective correctness of his opinion that Mr Portellos was, at that time, the owner of the material he valued. However, the inference does fairly arise that Mr Turner was not aware of the existence of other persons who might have shared in the legal ownership of the trust property as at the date of the appraisal.
It is to be accepted that a person acting as a trustee may be referred to in correspondence and business records without reference to his or her capacity as a trustee. However, when there exits, as on the applicants’ case, a number of joint trustees, the reference to one person in the singular being the owner of property, without reference to the others, an inference fairly arises that Mr Portellos’ joint trustee capacity was not raised with Mr Turner, and that Mr Portellos was Mr McNamara’s client in his personal capacity. The inference that Mr McNamara acted for Mr Portellos in his personal capacity finds further support in emails sent in December 2011 in which Mr McNamara made a request on a Friday afternoon to inspect the materials on the following Monday. Recall responded to the effect that it required two days’ notice to arrange access. Mr McNamara responded “Client is leaving for overseas on Monday afternoon. Needs to be Monday morning”.
On 25 January 2012, Mr McNamara requested that pallets 76 and 77 be “booked out” and “re-booked” in the name of Philip Pitman. Recall complied with the request. I find that this transaction, if it be one, occurred after the act of bankruptcy stated in the creditor’s petition, namely 23 June 2011.
On 12 June 2012, the pallets numbered 78 and 81 were transferred by Recall into an account held in the name of Mr Pitman. That transaction, if it be one, occurred after the date of the sequestration order made in respect of Mr Portellos’ bankrupt estate.
Then, on 29 June 2012, Mr Pitman sent an email to Recall in the following terms:
Hi Chris
Please Instruct your office to transfer the following 4 stock items 5509593874, 5509593875, 5509593879 and 5509593880 currently located in Account RL550628\520938 in the name Sotirios Portellos into the Account ON552349\PITMAN held by myself in the Name of International Trading Concepts PTY LTD.
The copy of letter of instruction from Mr Portellos is attached.
Once the Stock transfer has been made would you kindly, as previous, issue a letter per item stating Recall holding the item in the Name of International Trading Concepts PTY LTD, again leaving my name off the produced letters.
Thank you in advance.
Should you require any further information please don’t hesitate to contact me at any time on 0411082278
Regards
Phil Pitman
International Trading Concepts PTY LTD
The letter of instructions attached to the email appears to have been signed by Mr Portellos. It states:
Dear Chris
Further to my previous letters to you, this is to confirm the account establishment request was made by Philip Pitman in the name of International Trading Concepts Pty. Ltd.. This request was made to facilitate my requirements to have pallets 5509593874, 5509593875, 5509593879 and 5509593880 held in my Account number RL550628/520938 in my name, Mr Sotirios Portellos to be removed and re-deposited in to the newly created account established for Philip Pitman in the name of International Trading Concepts Pty. Ltd. being account number ON552349
Please Transfer/assign pallets with Recall numbers 5509593874, 5509593875, 5509593879 and 5509593880 from my account RL550628/520938 into the account held for Philip Pitman in the name of International Trading Concepts Pty. Ltd. being account number ON552349.
I have confirmed with Mr Pitman and he has acknowledged that he will be responsible for all ongoing costs relating to pallets Number 5509593874, 5509593875, 5509593879 and 5509593880.
I again confirm that Mr McNamara of Commercial & General Law is representing me in this transaction and that I have provided this email through his Australian email as I am currently overseas.
The Email address that Recall has on file is [email protected]. The Phone Number is 0403 124340
There is an urgent requirement to resolve this outstanding challenge and your assistance is greatly requested.
[signed Sotirios Portellos]
International Trading Concepts Pty Ltd is a company of which Mr Pitman is the sole director. Notwithstanding the reference to this purported transaction in the respondent’s defence (at [8]), Mr Pitman’s affidavit makes no reference to that company and the applicants did not file any affidavit evidence-in-chief or in reply explaining the “transaction” or Mr Portellos’ instructions relating to it.
The correspondence, considered as a whole, supports an inference that Mr Portellos and Mr Pitman (on behalf of International Trading Concepts Pty Ltd) entered or purported to enter into a transaction whereby the material stored on the pallets referred to were assigned by Mr Portellos to the company. The correspondence does not support the applicants’ pleaded allegation that “in 2011 the name of the account holder of the Rough Opal was changed to Philip J Pitman, another Trustee of the [Andamooka Opal Stone Unit Trust], in order to facilitate certain business opportunities which [the trust] was pursuing]”. The account name was not changed in 2011. It was changed in 2012 at times when bankruptcy proceedings against Mr Portellos had either commenced or had been concluded. The Recall accounts relating to pallets 74, 75, 79 and 80 were not “changed” into Mr Pitman’s name as “another trustee”. The Recall accounts were transferred or assigned to a company of which Mr Pitman is the sole director, the existence and purposes of which have not been explained. The accounts for holding pallets 76, 77, 78 and 81 were changed into the name of Mr Pitman, but there is no indication in the documentary evidence confirming whether Mr Pitman held those accounts in his capacity as a trustee of a trust rather than in, or purportedly in, his personal capacity.
Insofar as there were “business opportunities” justifying the change of accounts, no evidence has been adduced to explain what those opportunities were, and why it was necessary for Mr Portellos to be separately legally represented in a “transaction” he perceived to be “urgent” so as to transfer certain pallets of the Rough Opal into the name of International Trading Concepts Pty Ltd after the date of his bankruptcy. The recent conduct of Mr Pitman and Mr Portellos tends to suggest that they at least purport to be entitled to transact with each other in relation to the Rough Opal in capacities other than in their capacities as trustees of a trust. Mr Pitman’s assertion in his affidavit that all of his dealings with the Rough Opal have been undertaken in his capacity as a trustee of a trust is insufficient to prove that fact on the balance of probabilities, when considered in the context of the evidence as a whole. Too many unanswered questions arise from the documents to enable Mr Pitman’s broad assertion to be accepted at face value. The true position on the evidence is unclear.
Even without reference to the respondent’s evidence, I regard the admissible evidence relied upon by the applicants to be insufficient to prove their pleaded allegations to the requisite standard in any event. The admission into evidence of the Transfer Bundle was, I consider, critical to their case. The consequence of my rulings that PP1 to PP7 were inadmissible had the consequence that the applicants had adduced insufficient evidence to establish the critical propositions in [20] above.
Validity of “transfers”
Mr Johnson pleaded that the transfer of the pallets numbered 74, 75, 78, 81, and 80 are void pursuant to s 58(1)(a) and s 116(1)(a) of the Bankruptcy Act and that the transfer of the pallets numbered 76 and 77 are said to be void pursuant to s 120(1) and s 121(1) of the Bankruptcy Act. The provisions relied upon are as follows:
58(1) Subject to this Act, where a debtor becomes a bankrupt:
(a)the property of the bankrupt, not being after‑acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee;
…
116(1) Subject to this Act:
(a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and
…
is property divisible amongst the creditors of the bankrupt.
…
120(1)A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:
(a)the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b)the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
121(1)A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor’s bankruptcy if:
(a)the property would probably have become part of the transferor’s estate or would probably have been available to creditors if the property had not been transferred; and
(b) the transferor’s main purpose in making the transfer was:
(i)to prevent the transferred property from becoming divisible among the transferor’s creditors; or
(ii)to hinder or delay the process of making property available for division among the transferor’s creditors.
No relief, whether declaratory or otherwise, is sought by the respondent in respect of these pleaded allegations. The allegations are premised on an assumption that Mr Pitman and International Trading Concepts Pty Ltd are, or purport to be, the “transferee” in the transactions and now purport to be the legal owners of the Rough Opal by virtue of them.
It formed no part of the applicants’ case that Mr Pitman and International Trading Concepts Pty Ltd were the legal owners of the Rough Opal by reason of the transactions recorded or evidenced in the correspondence upon which Mr Johnson relied. As I have said, on the available evidence, the transactions do not support the applicants’ claim that they have, since 2011, been the legal owners of the Rough Opal in their capacities as co-trustees of the Andamooka Opal Stone Unit Trust.
For the reasons I have given above, the critical facts alleged by the applicants have not been established. The applicants are not entitled to a declaration to the effect that they are the owners of the Rough Opal and they have not otherwise established that they have any interest in the Rough Opal superior to Mr Johnson’s rights in possession. They did not advance an alternative case that Mr Pitman, or any company controlled by him are the owners. They do not have standing to seek an order that Mr Johnson is not the owner of the Rough Opal and it is, accordingly, unnecessary to make findings as to whether the transactions pleaded in Mr Johnson’s defence are void by virtue of s 120 or s 121 of the Bankruptcy Act. I do not pass comment on the validity of the transactions except to the extent that it has been necessary to do so in order to determine the applicants’ claim.
The application should be dismissed.
I will hear the parties as to costs.
I certify that the preceding one hundred and eighteen (118) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Charlesworth. Associate:
Dated: 17 August 2017
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