Federal Court of Australia

Vines (Trustee), in the matter of the Bankrupt Estate of Mitchell v The Edge TC Pty Ltd (No 3) [2025] FCA 142

ORDERS

THE COURT NOTES THAT:

1.    The interim receivers have given an undertaking to the Court that they will submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of these orders.

THE COURT ORDERS THAT:

1.    For the purposes of today's hearing, and pursuant to s 47B of the Federal Court of Australia Act 1976 (Cth), counsel for the interim receivers is permitted to deliver oral submissions by way of video link.

2.    The interlocutory hearing is adjourned to 10.15 am AWST on 23 April 2025.

3.    The injunction restraining Daniel Colin Thomas from dealing with or otherwise disposing of or encumbering any sale proceeds received by or on his behalf in respect of the sale of the aircraft described as a Textron Aviation Inc model 8200GT (VH-08MT) - manufacturer's serial number BY-432 granted by paragraph 5 of the orders made on 24 January 2025 is extended to 11.59 pm AWST on 23 April 2025.

4.    By 4.00 pm AWST on 17 March 2025, Mr Thomas must file and serve any further affidavits on which he relies.

5.    By 4.00 pm AWST on 31 March 2025, the interim receivers must file and serve:

(a)    any proposed originating process (including any cross claim), or any interlocutory process seeking substantive relief, against Mr Thomas, or any other person, or entity in connection with the aircraft referred to in paragraph 3 above and,

(b)    if necessary, any interlocutory application seeking leave to file and serve such process;

(c)    a proposed concise statement or statement of claim in support of such process; and

(d)    any further affidavits on which they rely.

6.    Liberty to apply.

7.    Costs reserved.

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

REASONS FOR JUDGMENT

JACKSON J:

1    In this proceeding Mr Kijurina and Mr Albarran were appointed to act as interim receivers of various assets in connection with the bankrupt estate of Sam Alexander Mitchell: see Vines, in the matter of the Bankrupt Estate of Mitchell [2024] FCA 1276 (Vines (No 1)); and Vines, in the matter of the Bankrupt Estate of Mitchell (No 2) [2024] FCA 1378.

2    On 24 January 2025, Mr Kijurina and Mr Albarran applied for freezing orders, in the alternative an injunction preventing the disposal of the proceeds of the sale of a Textron Aviation Inc model B200GT (VH-08MT) aircraft which appeared to have been sold. It is convenient to refer to this as the injunction application. Mr Kijurina and Mr Albarran made that application in their capacities as interim receivers of the property of the twelfth respondent, Wealthcheck Financial Services Pty Ltd. The person against whom they sought the relevant orders, Daniel Thomas, is not presently a party to the proceeding.

3    The inunction application was initially brought on an urgent ex parte basis. At the hearing on 24 January 2025, I granted the injunction that had been sought in the alternative, restraining Mr Thomas from dealing with or otherwise disposing of the proceeds of sale.

4    Mr Thomas was served and appears by solicitors. The injunction was extended by consent until the matter came back for hearing on 24 February 2025. At that hearing, I extended the injunction until 23 April 2025. These are my reasons for doing so.

5    The judgments of Feutrill J mentioned in the first paragraph above reveal a complicated array of respondents and issues. The injunction application potentially adds to the complication, so it will be helpful to delineate the issues that it raises, or potentially raises, in so far as they appear to me. But first, it is necessary to give a summary description of the factual background to the application.

Summary of factual background

6    It is not appropriate at this stage to make firm findings of fact. What follows is only a description of what appears on the face of the evidence for the purposes of the injunction application.

7    It appears that Mr Mitchell holds shares in a company called The Edge Ceres Pty Ltd. That company in turn is the sole shareholder of Wealthcheck. It holds the shares as trustee of a trust called the Edge Ceres Trust.

8    Mr Mitchell was the only director of Wealthcheck. On 19 September 2024, upon the sequestration order being made, by force of s 206B(3) of the Corporations Act 2001 (Cth) he ceased to be entitled to act as a director of Wealthcheck. No substitute director has been appointed.

9    Wealthcheck was the 'registration holder' of the aircraft until 20 December 2024. That is a designation found on the Australian Civil Aircraft Register maintained by the Civil Aviation Safety Authority (CASA). It appears to designate the owner of the aircraft, although there is evidence suggesting that the designation may not be conclusive. There is also evidence suggesting that Mr Thomas may have held at least a one-half ownership interest.

10    The interim receivers were appointed on 25 October 2024. In mid-November 2024 they became aware of a written agreement which named Wealthcheck and Mr Thomas as sellers of the aircraft and one Jose Jeronimo Nasser Ortigoza as purchaser. The purchase price was US$6.7 million. They also became aware that National Australia Bank Limited held a registered security interest over the aircraft, and that if it were sold for that purchase price there would be surplus sale proceeds after the bank was repaid in full.

11    The interim receivers corresponded with Mr Thomas and others seeking information about the aircraft and the status of the sale, which as at mid-November 2024 did not appear to have settled. It is sufficient to describe the correspondence in broad overview. Mr Thomas claimed that he was the sole owner of the aircraft. But he did not provide any detail of that claim or supporting evidence for it. The interim receivers did not concede the claim. As well as Wealthcheck being the registered holder of the aircraft, the interim receivers had records suggesting that Wealthcheck had made at least some of the loan repayments that had been due to the bank.

12    The interim receivers corresponded with the bank, Mr Thomas, and others with a view to reaching an arrangement whereby, if the aircraft were to be sold, 50% of the surplus sale proceeds after repaying the bank could be held in a separate account pending resolution of the dispute over who was entitled to them, with the other 50% going to Mr Thomas. But Mr Thomas did not accede to any such arrangement. This correspondence continued until 20 December 2024.

13    Then, according to the interim receivers, they learned on 6 January 2025 that the sale of the aircraft had been completed and the bank had been repaid in full. For completeness, the bank has asserted in correspondence that Mr Kijurina was made aware of the sale earlier; it has not been necessary to resolve these differing accounts. On 10 January 2025, the interim receivers put to Mr Thomas their suspicion that all the surplus sale proceeds had been paid to him. He has not replied to that.

14    The interim receivers have since put into evidence a CASA Cancellation of Aircraft Registration form in respect of the aircraft. Lodging such a form was apparently a necessary step before the sale of the aircraft. The form bears the date 17 December 2024. It identifies Wealthcheck as the registration holder of the aircraft. It also bears what appear to be the signatures of Mr Thomas and Mr Mitchell beneath a declaration that, relevantly, says that they are the authorised representative of the registration holder, that is, Wealthcheck. It is open to be inferred that submitting this form to CASA and/or the bank enabled the settlement of the sale of the aircraft to occur.

15    On the evidence before the Court, no explanations currently present themselves as to how that apparent declaration could have been correct given that Mr Thomas does not appear to have been a director of Wealthcheck at any relevant time, Mr Mitchell's bankruptcy meant that he was not eligible to act as director as at 17 December 2024, and the interim receivers had been appointed over all the property of the company (which the interim receivers allege includes the aircraft). Such explanations may be available or, conceivably, a different interpretation of the declaration might be open, but at present no such explanations or interpretations are apparent.

16    The interim receivers had not seen a copy of this CASA form at the time they brought the injunction application on 24 January 2025. The application was nevertheless brought on the basis that the interim receivers considered that at least part of the surplus sale proceeds belonged to Wealthcheck, and that it was likely that all the proceeds had been paid to Mr Thomas.

17    In the course of the ex parte hearing, counsel for the interim receivers properly accepted that the evidence was insufficient to justify freezing orders, but I considered that there was sufficient evidence to justify a short-term injunction preventing dispersal of any sale proceeds held by Mr Thomas. As has been said, that injunction was extended by consent until 24 February 2025.

18    The final aspect of the factual background that needs to be described appears in an affidavit that Mr Thomas affirmed on 21 February 2025. In summary, in that affidavit Mr Thomas presents evidence to the effect that:

(a)    on 24 December 2024, the surplus proceeds of the sale of the aircraft in the sum of A$1,486,468.45 were received into a bank account in the joint names of him and his wife, Kate Adams;

(b)    on the same day, almost all of that amount (A$1,432,000) was transferred to a bank account designated ‘Red Gum Wagyu’ held in the names of Danny Thomas Ventures Pty Ltd and Tam Pastoral Pty Ltd, where Australian Securities and Investments Commission (ASIC) records confirm that Mr Thomas controls the first of these companies, and ASIC records suggest that the directors of the second company are Timothy McKinnon and Anna McKinnon;

(c)    the balance of the sale proceeds were allocated as partial repayment of a loan from Ms Adams to Mr Thomas and were used by Ms Adams to meet various expenses;

(d)    on 27 and 30 December 2024 some A$668,000 was transferred from the Red Gum Wagyu account to an account in the name of Agzone, where ASIC records suggest that Agzone Pty Ltd is controlled by Bruce Moore;

(e)    the balance of the A$1,432,000, Mr Thomas says, was transferred out of the Red Gum Wagyu account 'to various third parties'; and

(f)    the above transfers were, Mr Thomas asserts, made in the normal course of his business operations.

19    A bank transaction history for the apparently relevant period for the bank account of Mr Thomas and Ms Adams is annexed to Mr Thomas's affidavit. So too are apparently relevant bank transaction histories for the Red Gum Wagyu and Agzone accounts. The relationship between Mr Thomas and the McKinnons and Tam Pastoral Pty Ltd, and the relationship between Mr Thomas and Mr Moore and Agzone Pty Ltd, are not explained in Mr Thomas's affidavit. Nor is it explained how Mr Thomas was able to obtain the Red Gum Wagyu or Agzone bank transaction histories. Nor are the 'third parties' identified beyond some names that appear in the Red Gum Wagyu bank transaction history.

20    On the basis of this evidence, Mr Thomas asserts that he no longer holds the surplus proceeds from the sale of the aircraft.

The issues that were before the Court (or potentially so) on 24 February 2025

21    It is now possible to describe the issues that were presented to the Court at the hearing on 24 February 2025, in the context of the background facts outlined above (which may or may not end up being in contest).

22    The first set of issues, logically if not in order of importance, concern who are the proper parties to this dispute and whether they need to be parties to this proceeding. The appointment of the interim receivers by the Court over the property of Wealthcheck (and many others) was made in this proceeding. But the interim receivers are not parties to this proceeding. There was a question as to whether they can move for orders against Mr Thomas in this proceeding if they are not parties to it.

23    The interim receivers say, however, that any claim against Mr Thomas will be brought in the name of Wealthcheck, which is already a respondent to this proceeding, so they do not need to be parties. Mr Thomas appeared by counsel at the hearing on 24 February 2025 and did not dispute that, as a matter of procedure. He did dispute the interim receivers' power to bring the proceeding at all, which I address below. I accepted, however, that Wealthcheck is likely to be the proper applicant in any proceeding against Mr Thomas or others arising out of the events sketched above.

24    However, Mr Thomas is not a party to this proceeding either. Thus the question of joining Mr Thomas as a respondent also needed to be addressed. The injunction was granted on an urgent ex parte basis on 24 January 2025 after taking that into account. At the hearing on that day, counsel for the interim receivers suggested that the persons named as applicants in the proceeding, namely the trustees in bankruptcy of Mr Mitchell's estate, were the proper parties to apply to join Mr Thomas as a respondent. I therefore made directions with a view to requiring the trustees to state their position on any such joinder.

25    The position the trustees then articulated was that they had no intention of applying to join Mr Thomas as a respondent to the proceeding. That led the interim receivers, at the hearing on 24 February 2025, to seek leave for Wealthcheck to bring a cross-claim against Mr Thomas in this proceeding, apparently with the intention that if leave to bring that cross-claim was given, Mr Thomas would be added as a respondent to the proceeding that way.

26    I have two concerns about this suggested way of proceeding. The first is that, if leave to bring such a cross-claim were to be granted, that may risk adding a new respondent (possibly more than one) to what is already an unwieldy number of respondents and other interested parties (including Mr Mitchell and the interim receivers themselves). And that new respondent (or respondents) may be added for the purpose of pursuing a substantive claim which may be different in nature to the claims that were the original subject of this proceeding. On 21 February 2025, the Friday before the hearing on Tuesday, 24 February 2025, the trustees in bankruptcy filed a concise statement which averted to Mr Mitchell's signature on the CASA form of 17 December 2024, but it seems unlikely that this makes any difference to this concern.

27    The second concern was that, while the interim receivers sought leave in broad terms to bring a cross-claim against Mr Thomas, the precise nature of that cross-claim has not been articulated. No draft cross-claim and statement of claim or other pleading has been provided. The Court had therefore been 'flying blind', as counsel for the interim receivers fairly put it at the hearing on 24 February 2025. After discussing these problems in oral submissions, counsel for the interim receivers did not press the application for leave to cross-claim. But as will be seen, this is more than a mere procedural gap in the injunction application.

28    The second set of issues concerned the interim receivers' power to bring the injunction application and to make any substantive application for relief. This is, of course, a potential issue because, as receivers appointed by the Court, ultimately the interim receivers can only have such power as is conferred on them by the Court.

29    The interim receivers rely on the following matters as giving them power to pursue the injunction application and any related application for substantive relief against Mr Thomas:

(1)    On 25 October 2024, until further order, Feutrill J appointed them, relevantly, as interim receivers 'of the property (within the meaning of that term in section 9 of the Corporations Act 2001 (Cth))' of Wealthcheck, defined as 'Property', 'for the purpose of identification, preservation and securing the Property in aid of the Trustee [in bankruptcy] and for the ultimate benefit of creditors of the estate of the Bankrupt' (orders of 25 October 2024, para 2).

(2)    Paragraph 3 of the same orders provided that:

The Interim Receivers have:

(a)    power to do in Australia and elsewhere, all things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objective for which they are appointed;

(b)    without limiting the generality of the power in the preceding sub-paragraph:

(i)    the powers set out in ss 420(1), 420(2)(a), 420(2)(e), 420(2)(f), 420(2)(g), 420(2)(k), 420(2)(n), 420(2)(p), 420(2)(q), 420(2)(r) and 420(2)(u) of the Corporations Act; and

(ii)    the power to investigate and report on the matters set out in paragraph 5 of these orders.

30    The reference here to s 420(2)(k) of the Corporations Act is particularly significant, according to the interim receivers, because that paragraph of the Corporations Act empowers receivers to bring or defend any proceedings or do any other act or thing in the name of and on behalf of the corporation. The receivers assert that bringing the cross-claim falls squarely within the ambit of that power.

31    Counsel for Mr Thomas, however, submits that the effect of paragraph 3(a) of the orders on 25 October 2024 (reproduced above) is that the interim receivers only have power to do 'things necessary or convenient to be done for or in connection with, or as incidental to, the attainment of the objective for which they are appointed'. Relying on Re Gondon Five Pty Limited and Cui Family Asset Management Pty Limited [2019] NSWSC 469 at [58]-[59] (Brereton J), he submitted that the function of the interim receivers is to preserve the status quo and their powers to commence litigation is restricted to litigation that is sufficiently connected to the purposes of the appointment.

32    Mr Thomas submits on the basis of the evidence summarised at [18]-[20] above that the 'joinder application' (by which he seems to mean the proposed application to seek relief from him in respect of the surplus sale proceeds) does not fall within the purposes for which the interim receivers were appointed. The relevant Property as specified in the orders appointing the interim receivers was the surplus sale proceeds, and they have 'ceased to exist'. There is nothing for the injunction to fasten on. Mr Thomas submits that the Property cannot be taken to include a monetary claim against him. Thus, he says, the interim receivers do not have power to seek a continuation of the injunction or to pursue the proposed cross-claim.

33    In response, counsel for the interim receivers submits that Mr Thomas had been less than forthcoming in his affidavit about the circumstances of the apparent dispersal of the surplus proceeds. As I have observed above, he tells us next to nothing about the nature of his relationship with Tam Pastoral Pty Ltd and the McKinnons or about his relationship with Mr Moore and an apparent ultimate destination of a substantial part of the funds, Agzone Pty Ltd. He also tells us nothing about the destination of the balance of the funds that were transferred to the Red Gum Wagyu account. The interim receivers submit that in those circumstances Mr Thomas should not be given the benefit of the doubt and the Court should proceed on the basis that it is possible that Mr Thomas still retains, or retains control of, at least part of the surplus sale proceeds.

34    I will make some observations about the issues that are raised by these submissions below, when I come to explain why I extended the injunction originally granted on 24 January 2025.

35    The third issue that appears to arise, at least potentially, is one of jurisdiction. The Court has had jurisdiction to make the orders it has made thus far because it has jurisdiction under the Bankruptcy Act 1966 (Cth): see Vines (No 1) at [2]-[19]. But it appeared to me that there is at least a question as to whether that source of jurisdiction would extend to a new claim by Wealthcheck against Mr Thomas or other persons seeking to recover part or all of the surplus sale proceeds or compensation for the alleged loss of those proceeds (whether or not in the form brought as part of this proceeding).

36    The fourth and final issue before the Court was, of course, whether the injunction should have been extended past 24 February 2025. I will now turn to explain why I decided it was appropriate to do so, and in the course of that will make some observations on the other issues just outlined.

Why the injunction was extended

37    I have said that the absence of any draft cross-claim or pleading against Mr Thomas was more than a procedural gap in the injunction application. It meant that I did not know the precise basis of any claim or proposed claim. It also meant that I did not know who, apart from Mr Thomas, might be named as a respondent to that claim.

38    That lack of knowledge meant it was all but impossible to make any reasonable assessment of the first three sets of issues identified above. I could not assess whether the current proceeding was an appropriate procedural vehicle for a proposed claim I had not seen. I could not assess whether the proposed claim was within the powers of the interim receivers as I did not know what that claim is going to be, or who it is going to be against. And I could not know whether it was within the jurisdiction of this Court. And I could not assess (at a minimum) whether there was a serious question to be tried if I did not know what that question or questions were.

39    At first blush, these significant uncertainties seemed to lie at the feet of the interim receivers, and thus militate against any extension of the injunction. Before explaining why I did nevertheless extend it, I will offer a few observations on the issues which may still usefully be made.

40    As to the first set of issues, I have already said that I accepted that Wealthcheck is likely to be the correct applicant in any substantive claim (if Mr Thomas wishes to agitate this point after seeing the proposed claim and pleading, he may utilise the liberty to apply that has been granted). On the question whether this proceeding is the appropriate vehicle, if the interim receivers wish to contend that it is, they will need to address why it is not suitable for them to commence a separate proceeding (where, on the face of things, they would require no leave). They will also need to address how the Court can manage the day-to-day procedural complications that are likely to arise in managing a proceeding with at least two sets of applicants (the trustees and the interim receivers) and at least two sets of respondents (the numerous present respondents and Mr Thomas and whoever else is named as a respondent in any claim against him). In particular, the interim receivers will need to explain how the Court and the parties can manage the proceeding if the two sets of parties are in dispute about different and distinct things (or conceivably they may seek to explain why they are not, in truth, different and distinct).

41    As to the second set of issues - whether the proposed claim is within the interim receivers' power - further questions are likely to arise once the precise basis of the proposed claim is articulated. The interim receivers and Mr Thomas need to address what, precisely is the relevant property which they say does, or does not, fall within the defined term 'Property' in paragraph 2 of the orders of 25 October 2024 (see [29(1)] above). Is it the surplus sale proceeds? Is it a personal (i.e. non-proprietary) claim against Mr Thomas or others (noting that the definition of 'property' in s 9 of the Corporations Act includes a thing in action)? Or is it all of the above?

42    Then, depending on the answers to those questions, it may also be necessary to address whether it is necessary or convenient to the attainment of the objective of preserving or securing the relevant property for the proposed proceeding to be brought. The answer to that question may be different if the subject Property is a pure monetary claim against Mr Thomas (which may endure until any limitation period expires) as against identifiable property such as funds, which can of course be dissipated much sooner than that.

43    There is little that can usefully be said about the third set of issues at this point. The existence of the Court's jurisdiction may turn on whether the claims raised form part of the same 'matter' (in the sense of dispute) as other claims where the Court does have jurisdiction (such as the other claims made in this proceeding). Or it may turn more straightforwardly on whether the new claims raised rely on Commonwealth legislation. It is impossible to know without seeing a more precise articulation of the claims.

44    Which leads to the fourth issue: whether the injunction should have been extended. As I have said, the uncertainties that arose from the lack of any draft cross-claim documentation could have been sheeted home to the interim receivers, as a discretionary reason why their application for an extension of the injunction ought to be refused. But there were three factors which persuaded me that this was not the appropriate outcome at this stage of the proceeding.

45    First, I was put on notice of the existence of a supervening issue that had made it difficult for the interim receivers to prepare their application to extend the injunction fully. Counsel for Mr Thomas very properly accepted that the issue did have that effect, so there is no need for me to describe it further. To that may be added difficulties the interim receivers have faced in obtaining the assistance of relevant persons to give them information about the transactions surrounding the sale of the aircraft, difficulties which appear on the face of the correspondence they have put into evidence. These matters explained why the application was, perhaps, incomplete, and so reduced the force of any argument that the interim receivers should suffer the consequences of that incompleteness.

46    Second, the factual background of the matter as outlined above suggests that there is a serious question to be tried. For on the face of things:

(a)    Wealthcheck owned the aircraft (at least in part);

(b)    Wealthcheck has made at least part of the loan repayments for the aircraft;

(c)    the aircraft was transferred to a third party without the consent of the interim receivers who were entitled to exercise control over the property of Wealthcheck and, they say, it was done without their knowledge;

(d)    Mr Thomas (and Mr Mitchell) appear to have procured that transfer in circumstances which require explanation, given the evidence adduced by the interim receivers;

(e)    Mr Thomas has as yet chosen not to contradict that evidence or to proffer any explanation;

(f)    Mr Thomas has made broad assertions about his entitlement to the funds but has declined to provide any evidence to support those assertions; and

(g)    Mr Thomas admits that he has dealt with the surplus sale proceeds and asserts that they are no longer in his control.

47    Of course, as I have emphasised several times already, Wealthcheck's claim against Mr Thomas is yet to be articulated fully. The question of whether the claim presents a serious question to be tried will need to be reassessed when that occurs. Mr Thomas may adduce evidence contradicting some of the matters in the previous paragraph. Also, as time goes on, it is likely that less allowance will be made for the difficulties the interim receivers have experienced in putting the application together which are mentioned above. But for present purposes, there appears to be a serious case to be tried for monetary or, perhaps, proprietary relief against Mr Thomas in connection with the sale of the aircraft.

48    Third, the balance of convenience favours at least a short-term continuation of the injunction so that the interim receivers can more fully articulate the claim they make against Mr Thomas. Mr Thomas contends that the surplus sale proceeds have all been paid out and has produced bank transaction histories which appear to show that all potentially relevant funds have flowed out of a bank account in the name of him and his wife. But he has not explained completely where and to whom the funds have flowed. As I have said, he has not explained his relationship with Agzone Pty Ltd and Mr Moore in circumstances where he appears to have had ready access to Agzone's bank transaction history. And Mr Thomas has not explained the payments to each of the third parties, beyond a bare assertion that they were made in the normal course of business. The principle in Blatch v Archer (1774) 1 Cowp 63 at 65; (1774) 98 ER 969 at 970 is engaged at this point: the inference that Mr Thomas retains some control over the funds, slight as it may be, is to be weighed in light of the fact that it was in Mr Thomas's power to produce evidence dispelling the inference, and he has not.

49    Even so, by itself that hardly placed the interim receivers in a strong position on the balance of convenience. But against it must be placed Mr Thomas's assertion that he no longer holds any of the surplus proceeds received in respect of the sale of the aircraft. If that is so, then there will be little prejudice to him if the injunction is continued for a few more weeks. He did not identify any such prejudice in submissions.

50    For those reasons I was satisfied that the balance of convenience favoured the continuation of the injunction for a period sufficient to permit the interim receivers to better articulate their claim. Considering that together with the strength of the as yet uncontradicted case against Mr Thomas, I concluded that the greater risk of injustice would arise if the injunction were allowed to lapse at this point in time.

Associate:

Dated:    27 February 2025

SCHEDULE OF PARTIES