Federal Court of Australia

Dimitriou v Pineview Property Holdings Pty Ltd [2020] FCAFC 218

ORDERS

THE COURT ORDERS THAT:

1.    The appellant’s application to adduce further evidence on appeal be dismissed.

2.    The appeal be dismissed.

3.    There be no order as to costs of the appeal.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

1    On 12 July 2018, the respondent, Pineview Property Holdings Pty Ltd, filed a creditor’s petition against the appellant, Mr Dimitriou. The debt underpinning the petition was the result of orders made by White J against Mr Dimitriou in Rubino & Anor v Pineview Property Holdings Pty Limited & Ors [2016] NSWSC 904 (referred to herein as the Liability Judgment and Proceeding). The present appeal is against a sequestration order made by the primary judge pursuant to the creditor’s petition: Pineview Property Holdings Pty Ltd v Dimitriou (No 2) [2019] FCA 1416 (the Primary Judgment).

2    The substance of the appeal concerns the effect on the creditor’s petition of a document described as a Deed of Release. The Deed of Release was not before the primary judge and accordingly it was necessary for Mr Dimitriou to seek leave to rely upon the Deed in this appeal. The Deed of Release relates to the settlement of proceedings between several other parties to the Liability Proceeding, including Pineview. Mr Dimitriou’s principal contention is that pursuant to the orders made in the Liability Judgment, his liability to Pineview was contingent on Pineview’s liability to other parties, and that as Pineview’s liability was extinguished under the Deed of Release, it follows that his liability was also extinguished.

3    Alternatively, Mr Dimitriou submitted that, irrespective of whether the Court admits the Deed of Release as evidence in this appeal, his bankruptcy should be annulled pursuant to the discretion conferred by s 52(2)(b) of the Bankruptcy Act 1966 (Cth).

4    Much of the submissions in writing and orally concerned whether the Deed of Release was or should have been produced to the primary judge in response to a call for a document ostensibly meeting its description. Similarly, a significant portion of the submissions were devoted to Pineview’s objection to the admission of the Deed of Release on appeal. In the events which have occurred, the respondent’s objection need not be decided, save as to relevance, as after the hearing of the appeal a document entitled “Respondent’s Concession on Appeal” was filed on 7 February 2020. The Concession states:

Without any admission, the respondent no longer opposes leave to tender the Deed of Release on the grounds that reasonable diligence on part of the appellant would have resulted in the document being disclosed to the appellant during the time the matter was before [the primary judge].

5    It follows from the foregoing that the following questions are before this Court:

(1)    should the Deed of Release have been produced to the primary judge;

(2)    was the debt underpinning the creditor’s petition, when considered in light of the Deed of Release, still owing for the purpose of s 52(1)(a) of the Act; and

(3)    whether, irrespective of the Deed of Release’s effect on the petition, the petition should be annulled under the discretion contained in s 52(2)(b) of the Act.

6    For the reasons that follow, the answer to the first question is, ‘yes’, and to the second and third questions, ‘no’. It follows that the appeal must be dismissed. However, for reasons discussed below, we have concluded that there should be no order for costs of the appeal.

Background

7    In the opening paragraph of the Primary Judgment, the learned primary judge said:

This judgment is the culmination of a long, drawn-out and tortuous hearing of a creditor’s petition.

8    The background to this appeal spans several judgments and appeals in the Supreme Court of New South Wales and the Federal Circuit Court, in addition to the proceeding before the primary judge and the present appeal.

9    The Primary Judgment as well as the Liability Proceeding originate from a 2012 property refinancing arrangement administered by Mr Dimitriou, which involved a suite of transactions. It is sufficient to mention some of the parties to, and features of, the refinancing arrangement:

    Alfio and Biagina Rubino (the Rubinos), were the proprietors of certain property;

    The properties were subject to mortgages which required refinancing;

    The Australian and New Zealand Bank (ANZ), was the original mortgagee of the properties and ultimately became the refinancer;

    Pineview had been incorporated to receive funds advanced by the ANZ for the purpose of re-financing and to hold the Rubinos’ properties as trustee;

    Ms Susan Huybers was at all relevant times the sole director and shareholder in Pineview. She was also at all relevant times a client of Mr Dimitriou;

    Mr Dimitriou was the Rubinos’ advisor and the architect of the refinancing arrangement involving the ANZ and Pineview; and

    The Rubinos’ son, Francesco (Frank) Rubino, acted as the Rubinos’ agent for the purpose of engaging Mr Dimitriou.

10    The salient features of the refinancing arrangement and the proceedings which followed are described further below. In short, however, the funds provided by the ANZ to refinance the Rubinos’ mortgage did not find their way to the Rubinos but were transferred to entities controlled by Mr Dimitriou. As a result, litigation ensued involving the parties referred to above, as well as various companies controlled by Mr Dimitriou. The relevant transactions and ensuing claims are set out in detail in the Liability Judgment at [3]-[21].

11    The transactions were precipitated by the financial difficulties Mr and Mrs Rubino were experiencing in about 2011. The Rubinos had secured their indebtedness to the ANZ with mortgages over certain properties owned by them. The ANZ called for repayment of the debt. Eventually a settlement was reached by which sums were assigned to particular titles. It was agreed that if those sums were paid by the Rubinos, the relevant titles held by the ANZ would be returned to them. The arrangement is described by White J at [7]-[10] of the Liability Judgment.

12    Mr Dimitriou, through a corporate entity named Wyse & Young International Pty Ltd, was engaged by the Rubinos’ son, Frank Rubino, on behalf of the Rubinos to assist in sourcing funds to pay the sums required to release the titles. Eventually, Mr Dimitriou arranged for the ANZ to provide the refinance. Mr Dimitriou structured a transaction by which certain of the properties and their mortgages were transferred to Pineview, newly incorporated for that purpose, which became the counterparty to the new loan from the ANZ. Two of Mr Dimitriou’s clients, Ms Susan Huybers and Mr Danny Kalischer, provided short term finance to Pineview to facilitate the transaction. Ms Huybers was the sole director and shareholder of Pineview, and she and a company she controlled called Green Global Pty Ltd guaranteed Pineview’s obligations to the ANZ.

13    As a result of the arrangement, $1,990,551 was received by Pineview from the ANZ, secured by the mortgage of the titles which had been transferred by the Rubinos to Pineview. Of this sum, $1,296,043.96 was paid to Mr Dimitriou or companies associated with him. White J concluded (at [19] of the Liability Judgment):

The effect of what was done was that using the personal covenant of Pineview, and personal guarantees of Huybers and Green Global, and using the lands of the Rubinos, Dimitriou obtained for himself almost $1.3 million.

14    Pineview defaulted on its obligations to the ANZ.

15    On 8 April 2013, the ANZ commenced proceedings for possession of the properties. No defence was filed and default judgment for possession was obtained.

16    On 8 October 2013, Mr and Mrs Rubino commenced separate proceedings in the Equity Division of the Supreme Court of New South Wales, against several defendants, relevantly including the ANZ and Pineview. There were several cross-claims filed, including relevantly for present purposes the third cross-claim by Pineview and Ms Huybers against Mr Dimitriou and Wyse & Young and Wyse Accounting Pty Ltd (a further entity controlled by Mr Dimitriou).

17    On 25 November 2015, before the trial of the proceeding before White J, the ANZ, Biagina, Frank and Lee Rubino (Lee in her own capacity and in her capacity as executrix of Alfio’s estate) entered into a settlement deed referred to as the ANZ Rubino Deed. By the ANZ Rubino Deed, ANZ and the Rubinos agreed to settle the Equity Proceedings (defined in the Deed as Supreme Court proceeding 2013/301796) on the terms that the Rubinos were to pay $1,315,000 to the ANZ in consideration for the discharge of mortgages over two of their properties.

18    White J upheld the cross claims by Pineview and Mrs Huybers against Mr Dimitriou and his related entities. In relation to Mr Dimitriou, White J said (at [20]-[21] of the Liability Judgment):

Dimitriou’s conduct was unconscionable and fraudulent. The principal victim was Huybers, not the Rubinos. The Rubinos were not deprived of their land by fraud. They may have been defrauded to the extent the land was encumbered beyond what Frank Rubino on behalf of his parents had agreed to. But that was not the case the plaintiffs advanced.

Pineview and Huybers are entitled to damages or equitable compensation against Dimitriou, Wyse & Young International and Wyse Accounting. Other companies under the control of Dimitriou to which substantial moneys were paid were not joined as defendants. It may be open to Pineview and Huybers to bring proceedings against other Dimitriou companies, but that is not a question that presently arises.

19    White J held that Dimitriou and his controlled entities’ conduct constituted breaches of several legal duties. His Honour found they owed fiduciary duties to both Ms Huybers and the Rubino entities which were breached (at [258]-[263]), and that they had committed the tort of deceit and engaged in unconscionable conduct within the meaning of s 20 of the Australian Consumer Law in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (at [264]-[265]). Ultimately, however, his Honour concluded that the “simplest” of Pineview’s claims was for an account of the moneys received by Mr Dimitriou and his entities from which Pineview did not receive any benefit (at [266]-[269]). This finding is of significance to this appeal and accordingly we set out White J’s reasons on this issue in full:

Because Dimitriou did not have Huybers’ authority to pay the moneys borrowed from the ANZ Bank to Wyse Accounting and Wyse & Young, the simplest of the claims is Pineview’s claim for an account of the moneys received by those companies. Pineview was the legal owner of the moneys borrowed from the ANZ Bank. The receipt of those moneys by Wyse Accounting with knowledge through Dimitriou that the moneys legally belonged to Pineview requires Wyse Accounting to account for the moneys it received. Dimitriou, who arranged for the moneys to be paid to Wyse Accounting and Wyse & Young, and was responsible for the subsequent disbursement of the moneys, is personally liable as a principal.

Pineview pleads that it did not receive the benefit of the moneys advanced by the bank and was not aware that the sums were being directed to it on account of the mortgages given to the bank. It pleads that Dimitriou, through Wyse & Young and without authority, directed the bank to issue cheques in favour of Wyse Accounting and Wyse & Young. It pleads that Huybers was not aware that the moneys had been lent by the bank and it seeks an order that Dimitriou, Wyse & Young and Wyse Accounting account for the sum of $2,000,820 (sic) plus interest.

Dimitriou said that he relied on Frank Rubino’s authority for the disbursement of moneys received by Wyse Accounting. He said he received a text message on his Blackberry from Frank Rubino authorising payments. He said that his Blackberry had been seized by the police. On the return of a subpoena to the NSW Police Detective Sergeant Schussler said that the Blackberry had been sent to Canada for forensic examination because Dimitriou had not provided the password. Dimitriou said that it was an old device and he no longer recalled the password. There was no corroboration of Dimitriou’s evidence that Frank Rubino had authorised payments from the moneys borrowed from the ANZ Bank.

The issue is moot. Whilst Mr and Mrs Rubino were the beneficial owners of the moneys borrowed by Pineview, the authority of the legal owner of those moneys was required for their disbursement. A beneficiary of a trust may be entitled to call for the transfer of the trust property and so put an end to the trust. But whilst the trust exists, decisions in relation to the application of trust property are to be made by the trustee. That means that Dimitriou needed Huybers’ authority, not Frank Rubino’s authority, for the disbursement of the moneys that Pineview borrowed.

20    Judgment was entered for Pineview and Huybers’ on their cross-claim and the following orders were made:

3. On the third cross-claim:

(a)    order that the claims for relief by the cross-claimants against the first and second cross-defendants (the plaintiffs) be dismissed (save as to costs);

(b)    give judgment for the first cross-claimant (Huybers) against the third, fourth and fifth cross-defendants [Mr Dimitriou and his entities] in the sum of $535,151.62 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) from 9 March 2012;

(c)     declare that the third, fourth and fifth cross-defendants [Mr Dimitriou and his entities] are liable to indemnify the first cross-claimant against her liability to the first defendant (the ANZ Bank) in respect of her guarantees of the moneys borrowed by the second cross-claimant (Pineview) from the ANZ Bank;

(d)     give judgment for the second cross-claimant (Pineview) against the third, fourth and fifth cross-defendants [Mr Dimitriou and his entities] in the sum of $1,276,389.29, plus interest in accordance with s 100 of the Civil Procedure Act from 9 March 2012;

(e)     declare that the third, fourth and fifth cross-defendants [Mr Dimitriou and his entities] are liable to indemnify the second cross-claimant against its liability to the ANZ Bank in connection with the mortgages given by it to the ANZ Bank on or about 9 March 2012 and in respect of any liability the second cross-claimant might have to the first and second cross-defendants in respect of payments made or liabilities incurred by the second cross-claimant otherwise than in the proper performance of the trusts on which the second cross-claimant holds the properties at Calderwood Road and Pine Valley Road, Galston for the first and second cross-defendants;

(f)     Reserve the proceedings for further consideration and give the cross-claimants liberty to apply in respect of the working out of the declarations in para 3(c) and (e), or in respect of any application for proprietary relief or an account of profits in respect of the use of moneys of the cross-claimants misappropriated by the third and fifth cross-defendants.

21    Since the Liability Judgment was handed down on 30 June 2016, Mr Dimitriou has not paid the judgment debt. He sought to appeal against the judgment but was unable to do so due to non-compliance with self-executing orders for the filing of materials: Dimitriou v Huybers [2017] NSWCA 252. He also sought to have the statutory demand issued by Huybers and Pineview set aside, and sought leave to pay by instalments: Rubino & Anor v Pineview Property Holdings Pty Ltd & Ors; In the matter of Wyse Accounting Pty Ltd; In the matter of Wyse & Young International Pty Ltd; In the matter of Wyse & Young International Pty Ltd; In the matter of Wyse Accounting Pty Ltd [2016] NSWSC 1780. By August 2019, there were at least seven sets of published reasons in the Supreme Court of New South Wales concerning Mr Dimitriou and his entities and Ms Huybers and Pineview, at least three of which concerned applications for a stay of the orders made by White J referred to above: Rubino v Pineview Properties Pty Ltd (No 7) [2019] NSWSC 1031, [2]-[3] and [5].

22    Returning to the substance of the appeal, pursuant to the orders made by White J, Ms Huybers and Pineview were granted three categories of relief as against Mr Dimitriou and his entities:

    payment of Ms Huybers’ costs fixed in the sum of $535,151.62 plus interest (order 3(b));

    a declaration that Mr Dimitriou and his entities indemnify Ms Huybers against liability to the ANZ under her guarantee of the loan to Pineview (order 3(c)), and indemnify Pineview for largely the same (order 3(e)); and

    damages of $1,276,389.29 plus interest payable to Pineview (order 3(d)).

23    Subsequent to the Liability Judgment, the non-Dimitriou parties to the proceeding settled. Their settlement was recorded in the following deeds:

(1)    The Deed of Release, substantially the subject of this appeal, dated 25 November 2015. The parties to the deed were those listed above at [9] save for Mr Dimitriou; and

(2)    The Costs Deed, dated 24 November 2016. The parties to this deed were all of those parties to the Deed of Release and additional parties not relevant for present purposes.

24    Mr Dimitriou appears not to have known of the existence of the Deed of Release and Costs Deed when they were entered into.

25    Returning to the narrative, on 30 January 2018, Pineview issued a bankruptcy notice (BN221502) to Mr Dimitriou. This notice was subsequently set aside on 3 April 2018 by Registrar Wall. Pineview also commenced separate proceedings in the Federal Circuit Court (SYG2293/2017).

26    The Circuit Court proceedings have some relevance to this appeal as we shall explain. They concerned an anterior application for bankruptcy against Mr Dimitriou by Pineview and Ms Huybers. Of relevance is that Mr Dimitriou was given leave by Judge Dowdy to subpoena documents meeting the description of the Deed of Release and documents relating to the performance of it. The draft subpoenas were addressed to the ANZ and others and sought the following:

All documents that set out the settlement agreements and settlement deed and consent orders, included [sic] but not limited to the settlement adjustment sheet, the direction to pay advises [sic] between YOU, and [Pineview, Ms Huybers] and the ‘Rubino Parties’ … resulting from the [Liability Judgment] …

The indemnity release deed between YOU, and [Ms Huybers] as guarantor for [Pineview] that was made between 1 March 2016 – 2 December 2017.

A record of ALL payments made to you by The ‘Rubinos Parties’, on behalf of … [Pineview and Ms Huybers] … because of the [Liability Judgment].

27    Ultimately the subpoena was not issued as the proceedings were discontinued by Pineview. However, the subpoena takes on relevance in the course of events before the primary judge in the present proceeding as the documents sought to be subpoenaed were the subject of the unanswered call at a hearing before the primary judge.

28    On 18 April 2018, on Pineview’s application the Official Receiver issued Bankruptcy Notice BN223293 which is the subject of the present proceeding (Primary Judgment at [3]). It was not complied with, and accordingly on 12 July 2018, Pineview filed a creditor’s petition in this court seeking a sequestration order against Mr Dimitriou.

PROCeedings before the primary judge

29    On 15 August 2018, Mr Dimitriou filed his notice of opposition to the creditor’s petition. He was unrepresented at the time of filing (Primary Judgment at [10]), although he was represented on occasions during the course of the proceedings.

30    The course of proceedings before the primary judge was not straight forward, as described by the primary judge (at [7]):

Unfortunately, Pineview’s attempts to have the creditor’s petition heard and determined in a timely fashion have been frustrated by repeated adjournment applications, changes of legal representation and other procedural applications by Mr Dimitriou which have been productive of considerable delay. Even more unfortunately, Mr Dimitriou’s grounds for opposing the application changed over time and, for the most part, lacked clarity.

31    A description of the various interlocutory applications are set out in the Primary Judgment and need not be repeated. However, there was a course of events which led to the primary judge’s ruling concerning the admissibility of the Deed of Release, and his Honour’s reasons with respect to the application of ss 52(1) and (2) of the Act.

Non-production of the Deed of Release

32    On 14 December 2018, in the course of the first hearing before the primary judge, Mr Dimitriou’s solicitor, Mr Hall appeared. He sought an adjournment due to counsel being unavailable due to illness. The application for an adjournment was refused.

33    Following the refusal of the adjournment application, Mr Hall began his documentary tender. During the course of tendering documents, he made a call for the documents the subject of the subpoenas for which leave was granted by Judge Dowdy. This led to the following exchange, which we set out in full in fairness to the participants:

MR HALL: I appreciate your Honour has ruled on the adjournment application. Those paragraphs concerned the document that was the subject of subpoena in a previous creditor’s petition proceedings between these same parties over the same debt, and that was dealt with by Judge Dowdy in the Federal Circuit Court. As I understand it, Judge Dowdy granted leave to Mr Dimitriou to issue a subpoena calling for an agreement that was entered into by every party to the principal proceedings before White J in a settlement agreement except for Mr Dimitriou, who knows not of the contents of that agreement.

I think, in the circumstances, your Honour, the issue as to paragraph 22 to 30 goes away on two bases: (1) that your Honour has refused the adjournment, but it would go away on this basis if I could call for production of that agreement for which leave to grant – issue a subpoena was granted in the prior proceedings before Judge Dowdy. So that evidently settled many of the claims or, perhaps, all of the claims between the parties to these proceedings, and we would say that that is a relevant document, as we understand Judge Dowdy thought it was, for the determination of this creditor’s petition proceedings.

HIS HONOUR: Anyway, as I – so you’re not going to seek to read those paragraphs, but you’re going to call for production of a document.

MR HALL: Yes, I will call for production of the agreement.

HIS HONOUR: Yes.

MR ALLEN: Do we have it here? Not produced.

HIS HONOUR: ..... you can - - -

MR HALL: Well, your Honour, I’m not sure that’s quite satisfactory in circumstances - - -

MR ALLEN: .....

HIS HONOUR: Well, you can discuss it when – discuss that issue with – you can renew your call after lunch, if you like, and discuss it with Mr Allen. I actually don’t know – I don’t know anything about the proceedings before Judge Dowdy or what the document is and what its relevance is.

MR ALLEN: It’s a clear abuse of process because it’s not an issue raised in the amended grounds of opposition.

HIS HONOUR: So your opposition to the course is that not – your initial reaction was just not produced, but you - - -

MR ALLEN: No, I got instructions, and it’s not in court.

HIS HONOUR: Yes. But you say what’s the relevance anyway.

MR ALLEN: Yes.

HIS HONOUR: I don’t know what the – what is the relevance?

MR ALLEN: As related to the grounds of opposition.

HIS HONOUR: Anyway, look, I think the way it should be dealt with is this: that you can make – you’ve made the call. There’s nothing to produce at the moment ..... some steps can be taken to obtain the document, but then if you want to tender it, then you’re going to have to convince me as to what its relevance is by reference to the grounds of opposition to the creditor’s petition before I allow you to tender it.

MR HALL: We don’t have it. We don’t have it. That’s the thing.

HIS HONOUR: No, no, no, but when you – if it’s produced, if it can be produced after lunch, then it can be produced. If Mr – a call on a document is, effectively, like a subpoena, so if it can be physically produced, it can be produced to the court. Mr Allen can say, “It’s produced, but I oppose access on the basis there’s no other legitimate forensic purpose,” or there can be an argument about admissibility. But we will deal with it that way.

MR ALLEN: The law is a bit more fluid in the sense that it depends on the nature of the order because there can be a call, and the failure to answer the call just means that secondary evidence of the document can be admitted. But if your Honour wants to say it’s a subpoena duces tectum, that’s the correct Latin.

HIS HONOUR: Yes.

MR ALLEN: But Mr Kekatos is going to go back to his office and try to find the documents.

HIS HONOUR: Yes. So let’s just deal with that after lunch if it can be produced, but then that’s not necessarily to say that either (a) access will be granted, or (b) it will be tendered. That will require Mr Hall to demonstrate why there’s a legitimate forensic purpose in him obtaining access to the document by reference to the notice of grounds of opposition and (b) how – and it’s the same point: how it could possibly be relevant. So - - -

(emphasis added)

34    After the luncheon adjournment the call was renewed, and the following exchange took place:

MR HALL: Your Honour, I was wondering if my friend could advise the court of the status of the document for which we called before the lunch adjournment. I forgot to ask him about it.

HIS HONOUR: Yes.

MR ALLEN: I produced two copies – counterpart copies, I’m told – of the relevant document to the court. Objection – sorry, access is objected to, your Honour, because it has got no relevance whatsoever.

HIS HONOUR: Yes. Just let me have a look at the document.

MR ALLEN: They’re counterparts, I’m told.

HIS HONOUR: So this is a deed between various parties, not including Mr Dimitriou?

MR ALLEN: Yes.

…

HIS HONOUR: Yes. Yes. Well, Mr Hall, what is the relevance of this document?

MR HALL: Your Honour, without having in fact seen it, it’s a little hard for me to address on it.

MR ALLEN: Well, it’s your - - -

HIS HONOUR: Well, that’s part of the difficulty. You’ve got to – if you had subpoenaed this document, you would have to demonstrate the legitimate forensic purpose for the subpoena in absent – in circumstances where you hadn’t seen it, so that’s what you’re being asked to do now.

MR HALL: Your Honour, on its face, we understand it to be a document that settles the claims of the plaintiffs, defendants, cross-claimants and cross-defendants in the proceedings subject of this petition. The principal judgment of White J contains a number of paragraphs that deal with the question of indemnities and also how those indemnities will operate in circumstances of contingencies. We say that the settlement and the way in which that settlement may deal with questions of indemnities and contingencies is a matter that is relevant as to the circumstance in which the applicant in these proceedings, having entered into a commercial settlement with other parties in the proceedings in which the judgment is maintained or was obtained, is entitled to bring claims in this action which it brings.

…

HIS HONOUR: What do you expect the agreement is, and how does it bear on any of the issues the subject of this proceeding?

MR HALL: Well, your Honour, as we understand it, it’s an agreement that settles the claims between every party to the proceedings in which the judgment was obtained except the proceedings insofar as they concern us.

MR ALLEN: I can tell your Honour that my instructions that no such document exists.

HIS HONOUR: I thought this was the document that has just been handed up – is the document that settles it - - -

MR ALLEN: Yes, yes, but - - -

HIS HONOUR: - - - other than as against your clients and his.

MR HALL: Well, your Honour, my friend Mr Allen has said there is no such document that exists, so I’m just going off the - - -

MR ALLEN: It postdates the proceedings.

HIS HONOUR: What is the basis of your assertion that such a document does exist?

MR HALL: If I could just have a moment, your Honour.

MR ALLEN: Can I – there is a deed that settles the costs disputes.

HIS HONOUR: In addition to this .....

MR ALLEN: Yes. But your Honour should ..... my - - -

HIS HONOUR: Costs as between the same parties.

MR ALLEN: Except with the ANZ parties ..... parties. There is a deed of settlement that relates to disputes about cost because the parties agree to how much should be paid.

HIS HONOUR: Well, that has got nothing to do with anything either.

MR ALLEN: Yes. And if I could be excused.

HIS HONOUR: Yes.

MR ALLEN: Sorry. Just for the record, I’ve confirmed with Mr Ropash and Mr Biggs, who appeared – or represented to the proceedings that the subject matter of the latter deed is confined to costs issues.

HIS HONOUR: Yes.

MR HALL: Your Honour, obviously if the subject matter of the latter deed is confined to cost issues then it’s hard to see how it would be relevant to the principal debt claim in these proceedings.

HIS HONOUR: Yes.

MR HALL: That is difficult to assert, and I wouldn’t seek to do so.

(emphasis added)

Discussions concerning Deed of Release on Appeal

35    On appeal, counsel for Pineview submitted that the ‘deed’ handed up to the Primary Judge in response to the call was in fact the Deed of Release. On appeal the following exchange occurred between counsel for Pineview and the Court:

MR ALLEN: You will see that the call is for a document that settles the claims between every party to the proceeding.

STEWART J: Which page are you on?

MR ALLEN: 67.

STEWART J: Well, the call at page 66 is for the documents referred to in the subpoena which is an agreement concerning the executed transfer dealing made on 28 November 2017.

MR ALLEN: What I was responding to is the call – the oral call when Mr Hall ..... for a document that was entered by every party.

STEWART J: Acceptance [sic] so far as they concern us. In other words, not - - -

MR ALLEN: Yes.

STEWART J: - - - excluding Mr Dimitriou.

MR ALLEN: Yes.

STEWART J: Which is the deed of 28 November 2017.

MR ALLEN: And the only thing that’s clear is the lack of clarity about what was called for and what document was actually produced.

STEWART J: Well, it seems what was called for was very clear. It was the document dated on or about November 2017, and Mr Kekatos he says he gave that document – P2, I think it’s called – to Ms Felthouse. Ms Felthouse says she gave some documents to you, but she’s not able to say which ones they were.

MR ALLEN: Yes.

STEWART J: And you say to the judge – well, you give him a document which is, it seems to me fairly clear on this, that it’s the one referred to in paragraph 25 of the judgment, and not the one in November 2017. In other words, the 2015 deed.

MR ALLEN: Yes.

STEWART J: And then you say your instructions are that document that has been called for, which is the November 2017 deed, doesn’t exist.

MR ALLEN: I was - - -

STEWART J: So you said it doesn’t exist, but Mr Kekatos says that he gave it to Ms Felthouse who said she gave it – effectively, she gave it to you.

MR ALLEN: Yes, and, unfortunately, to put this in context, this issue arose for the first time on Tuesday. This point was raised on Tuesday for the first time. My client hasn’t had the opportunity to see what Mr Hall says about it, and, of course, I couldn’t give back the brief in three days to give evidence of what I recall, if anything, about what occurred. So there is some prejudice to the respondent in the late bringing up of this point, but - - -

STEWART J: Well, do you want an adjournment?

MR ALLEN: No, but the answer is this, in any event.

STEWART J: So you don’t want an adjournment.

MR ALLEN: No.

STEWART J: Okay.

MR ALLEN: But it’s a reason why leave should not be given to rely on the application for new evidence, given that the application was filed late.

STEWART J: Speaking for myself, I don’t see how the deed makes a big difference, but that doesn’t for a moment alleviate my concern as to how you could have said to the court that “My instructions are that no such document exists” when we know it does exist, firstly, and we know that those instructing you at the time had it because they said that they had it.

MR ALLEN: There’s a very different – largely between people making mistakes on their feet on their own. What is not alleged is that there was some deliberate attempt to keep this document secret from Mr Dimitriou, and, in any event, that probably doesn’t matter because if your Honour goes to tab 112.3

(emphasis added)

36    The evident submission Mr Hall was attempting to make to the primary judge was the indemnities given by Mr Dimitriou were no longer operative due to the primary liability to the ANZ having been extinguished under the Deed of Release.

37    Mr Hall abandoned his call for the Deed of Release on the basis of counsel for Pineview’s assurance that it did not exist and that only the Costs Deed existed. For reasons we shall explain below, the Deed of Release does not assist Mr Dimitriou. We note however that the explanation given by Counsel for Pineview concerning the failure to produce the Deed in answer to Mr Hall’s call for it was less than satisfactory. It is also unsatisfactory that it was not until after the hearing of this Appeal that Pineview made the Concession (referred to above at [4]).

38    In early June 2019, Mr Dimitriou sought leave from the primary judge to reopen his case. In his affidavit dated 24 January 2020, Mr Dimitriou deposed to obtaining an unexecuted copy of the Deed of Release in July 2019:

On 5 July 2019, I attended at Court before Judge Wigney [sic] to instruct Mr Marshall SC and Mr Lord on an application to re-open my case and to amend the Notice of Grounds of Opposition. The matter adjourned shortly after 11 am. At 12:33 pm that day I received from Mr Frank Rubino an email enclosing an unexecuted copy of the Deed of Release. I arranged to forward the email to Roger Marshall SC at 12:36 pm that day.

Shortly after that, at 12:38 pm that day I received by email from Mr Frank Rubino that Mr Rubino had obtained from Mr Daniel Essey solicitor containing certain information, namely, three counterpart copies of the Costs Deed…

39    Mr Dimitriou deposes to unsuccessful attempts to obtain executed copies of the deeds from Mr Rubino. Eventually, on 25 September 2019, Mr Dimitriou obtained executed copies, after judgment below had been reserved.

40    Leave to reopen was subsequently granted, with timetabling orders entered for Mr Dimitriou to serve further evidence and the proceeding listed for further hearing on 1 August 2019. Mr Dimitriou did not comply with certain orders that had been made regarding the filing of further evidence. After a further adjournment, the further hearing of the proceeding occurred on 21 August 2019.

41    Mr Dimitriou appeared unrepresented at the further hearing. He did not seek to tender the unexecuted Deed of Release. As described above, Mr Dimitriou did not have an executed copy of the Deed at this time.

42    At the further hearing Mr Dimitriou submitted that the costs debt, claimed to be owed to Ms Huybers had been satisfied by the Rubinos pursuant to the Deed of Release, and so too the judgment debt. This submission is in substance the same as that which is pressed in this appeal under ground one.

43    Mr Dimitriou’s Further Amended Notice of Grounds of Opposition to the creditor’s petition advanced three grounds before the primary judge. The first and second grounds are not the subject of appeal. The third ground was that there was ‘sufficient cause’ within the meaning of s 52(2)(b) of the Act for the sequestration order not to be made. His Honour set out detailed reasons concerning ground three at [130] to [171] of the Primary Judgment which need not be repeated.

44    On 30 August 2019, judgment was delivered in favour of Pineview.

The appeal

45    On 27 September 2019, Mr Dimitriou filed his Notice of Appeal. This notice contained five grounds, the last three of which contended bias on the part of the primary judge. On 25 November 2019, Mr Dimitriou filed an amended notice of appeal, abandoning the bias grounds, but adding several others:     

Grounds of appeal

1.    The primary judge erred in determining. pursuant to s 52(1) of the Bankruptcy Act 1966 (Cth) ('Act'), that the debt owed to Pineview Property Holdings Pty Ltd was "still owing" ('Debt Owing Contention').

2.    The primary judge erred in failing to be satisfied by the appellant, pursuant to s 52(2)(b) of the Act, that there was some "other sufficient cause" for the sequestration order not to be made ('Sufficient Cause Contention').

3.    The primary judge erred and denied procedural fairness in rejecting certain evidence which was relevant to the determination of the Debt Owing Contention and the Sufficient Cause Contention.

4.    The primary judge erred and denied procedural fairness in denying the appellant the opportunity to cross-examine or call Ms Susan Huybers as the sole director of the respondent to give oral evidence, including as to the paragraphs of her affidavit which were not read, and her understanding and belief as to the legal costs the respondent has incurred administering the Trust Assets since 24 November 2016 to 21 August 2019 to satisfy the Debt Owing Contention' ('the Huybers' Evidence Contention').

46    During the course of the appeal ground 4 was abandoned.

47    At a case management hearing before Justice Markovic on 28 January 2020, the Tuesday before the hearing of the appeal to commence on Monday, 3 February 2020, Mr Dimitriou sought to rely upon a further amended notice of appeal. The further amended notice of appeal sought to add an additional ground 5 as follows.

5.    The trial of the proceedings before Wigney J miscarried because evidence which was relevant to the Appellant’s [sic] and capable of producing a different outcome, and was the subject of a call on behalf of the Appellant on 14 December 2018, was not produced, and not before the Court.

48    Leave to file the further amended notice of appeal was reserved to be determined as a question in the appeal.

49    Mr Dimitriou filed written submissions running to 77 paragraphs. Almost the entirety of the submissions concern the circumstances surrounding the non-production of the Deed of Release. In no place do the submissions specifically refer to any of the grounds of appeal.

The effect of the Deed of Release on the petition

50    Grounds 1, 3 and proposed ground 5 relate to the effect of the Deed of Release on the debt said by Pineview to be owing to it and s 52 of the Act. That section is relevantly as follows:

52     Proceedings and order on creditor’s petition

(1)     At the hearing of a creditor’s petition, the Court shall require proof of:

(a)     the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

   (b)     service of the petition; and

(c)     the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.

(1A)     If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver before the end of the period of 2 days beginning on the day the order was made.

(2)     If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:

  (a)     that he or she is able to pay his or her debts; or

(b)     that for other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition.

51    Mr Dimitriou submitted that the effect of the Deed of Release was to resolve the rights and liabilities as between the ANZ, the Rubinos, Pineview and Ms Huybers. He submitted that accordingly the debt was no longer “still owing” within the meaning of s 52(1)(c).

52    The premise of this submission is that the only obligation upon which any debt is owed by Mr Dimitriou to Pineview is a contingent liability to indemnify Pineview for its indebtedness to the ANZ. This premise and the submissions underpinning it are not correct.

53    In his oral submissions Mr Dimitriou asserted several reasons for the judgment debt being contingent upon the indebtedness of Pineview to the ANZ and Mr Dimitriou’s contingent obligation to indemnify Pineview in respect of that indebtedness. First, Mr Dimitriou pointed to the cross-claim being ‘derivative’ on the liability of Pineview to the ANZ. This was said to flow from the cross-claim being brought in response to the ANZ bringing its proceeding against Pineview and Ms Huybers as defendants, it not therefore arising in separate proceedings by Pineview and Ms Huybers against Mr Dimitriou in connection with his conduct in misappropriating funds belonging to Pineview. Second, Mr Dimitriou relied on the framing of the relief itself. He drew attention to the relief claimed in paragraph 3(c) of the Cross-Claim, which is in the form of a declaration that Mr Dimitriou is liable to indemnify the second cross-claimant against its liability to the ANZ.

54    Counsel for the Appellant referred to Culleton v Balwyn Nominees Pty Ltd [2017] FCAFC 8; 343 ALR 632, where Allsop CJ, Dowsett and Besanko JJ said at [40]:

… Bankruptcy is not just a variety of inter partes litigation; it does not deal only with the private rights and obligations of the debtor and creditor; it is not a form of judgment execution. It is directed to the estate of a person who is insolvent. In that sense it has a public interest, through the general body of creditors and potential creditors of the debtor and prospective bankrupt, and through what is referred to as the change of status of the person who becomes a bankrupt. That status is changed because of the provisions of the Act which inhibit conduct and affect rights and obligations of the bankrupt, including making the bankrupt susceptible to criminal punishment for what would otherwise be innocent conduct.

55    This authority in no way assists Mr Dimitriou’s proposition that the only obligation supporting his indebtedness to Pineview was an obligation to indemnify Pineview for its liability to ANZ. The observations referred to above are directed to the status and characteristics of a person who becomes bankrupt. They do not address any question concerning the characterisation of an obligation pursuant to which an indebtedness has been incurred, or to the consequent insolvency of the person and the making of a sequestration order.

56    Mr Dimitriou’s submissions concerning the effect of the Deed of Release are founded, as we have said, on a false premise. His submissions impliedly equate his position to that of a surety under a guarantee. The surety is liable to the creditor contingent upon default by the principal debtor. It follows in such a case that the surety is no longer liable once the principal debt has been discharged, or the obligation as between the creditor and principal debtor has been satisfied by some compromise by which the debt is discharged between the creditor and principal debtor.

57    But that is not this case. As the reasons given by White J in the Liability Judgment make clear, Mr Dimitriou was the principal wrongdoer and found liable as such. By Order 3(d) (referred to at [20] above), judgment was entered against Mr Dimitriou and his entities in the sum of $1,276,389.29 plus interest. This judgment debt was not contingent upon any obligation to indemnify Pineview against its liability to the ANZ. The indemnity was the subject of a separate declaration contained in order 3(e) referred to above (at [20]). Even if it may be concluded that ANZ’s rights merged in the Deed of Release, which it is unnecessary to decide, such merger is of no consequence to the judgment debt created by order 3(d). Further, if it were necessary for Pineview to have brought proceedings against Mr Dimitriou to enforce the declaration of his liability to indemnify Pineview, a compromise between Pineview and the ANZ would not have exculpated Mr Dimitriou from liability. If the settlement had required Pineview to pay a sum in settlement of its obligations to ANZ, subject to establishing that the settlement was reasonable, it was open to Pineview to enforce its indemnity in the sum agreed (see Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38, 192 CLR 603).

58    For the above reasons, Mr Dimitriou’s contentions concerning the effect of the Deed of Release in relation to his indebtedness to Pineview are untenable.

59    We apprehend that the same contentions would have been advanced to the primary judge had the Deed of Release been produced when called upon on the first day of the hearing. Needless to say, the contentions would have been inutile for the same reasons. However, we nonetheless regard the conduct of Pineview in relation to responding to the call for production of the Deed of Release to have been obstructive and obfuscating. Pineview should have produced an executed copy of the Deed of Release when called upon to do so. It was entitled, as it did on this appeal, to maintain its objection as to relevance. However, it was legitimate for Mr Dimitriou to call for the Deed as there was plainly a legitimate forensic purpose in considering its effect, if any, on Mr Dimitriou’s potential liability pursuant to the indemnity in respect of Pineview’s indebtedness to the ANZ.

60    Unfortunately, the pursuit of the Deed of Release both before the primary judge and on this appeal by Mr Dimitriou and the resistance to its production below and its tender on this appeal became a distraction to the point that the Deed of Release, like the proverbial “red herring”, led the parties in to a costly and time consuming collateral and ultimately misconceived contest.

61    While Mr Dimitriou is responsible for the genesis of this distraction, the approach of Pineview in either refusing or failing to produce the Deed of Release exacerbated the collateral inquiry about the existence of the Deed. The Concession by Pineview made after the hearing of the appeal should have been made at the outset, for it is plain having regard to its failure to produce the Deed when called upon, that the Deed was not available to Mr Dimitriou below upon reasonable or diligent inquiries. It is evident from the above description of the course of events before the primary judge in relation to the Deed, much time was spent on the contest concerning its production. Similarly, on this appeal a disproportionate amount of time was spent on whether there was an impediment to the Deed being tendered on the appeal having regard to whether it could have been disclosed below. While we acknowledge the belated concession, this question should not have been in issue on this appeal. In our view, the conduct of Pineview below and on this appeal regarding the production of the Deed of Release was not consistent with a party’s duty to conduct a proceeding in this Court upon the real issues in contest as required by ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). For the reasons given above, the Deed of Release is of no relevance to the debt upon which Pineview’s creditor’s petition was founded and accordingly we reject its tender on this appeal. However, given the inordinate time and cost associated with Mr Dimitriou’s efforts to obtain the Deed and, in our view, Pineview’s unreasonable resistance to its production, Pineview should not have its costs of this appeal.

62    It follows from what we have said that the appeal must be dismissed. The Deed of Release should not be admitted in evidence on the appeal. The application for leave to further amend the notice of appeal is similarly refused for the same reasons, namely that the Deed of Release is not relevant to the question of whether there was a debt owed to Pineview by Mr Dimitriou.

63    The only remaining ground of appeal (appeal ground 2) is dismissed. This ground seeks to impugn the exercise of discretion by the primary judge in failing to find there was another sufficient cause for not making a sequestration order pursuant to s 52(2)(1) of the Act. This ground was described as a “fall back” position for Mr Dimitriou. The contention put by Mr Dimitriou was that even if the Deed of Release did not have the effect of satisfying Mr Dimitriou’s liability to Pineview, the posited practical reality was that there would be no call on Mr Dimitriou’s debt to Pineview. As we have said, the Deed has no effect on Mr Dimitriou’s indebtedness. Similarly, it cannot have any effect on the likelihood that Pineview will call for payment. It follows that we are not satisfied that the Deed constitutes an other sufficient cause for the purposes of s 52(2)(b) by reason of which a sequestration order would not be made.

disposition

64    For the above reasons, the appeal is dismissed with no order as to costs.

Associate:

Dated:    8 December 2020