The Official Trustee in Bankruptcy v. D'Jamirze & Ors. [1999] NSWSC 1249

The Official Trustee in Bankruptcy v. D'Jamirze & Ors. [1999] NSWSC 1249 - NSWSC 1999 case summary — Zoe

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FACTUAL ISSUES Evidence 24 I will briefly outline significant evidence given in the case. Vladimir gave evidence that in 1989 an entity known as "Razvitie Russia", associated with the D'Jamirze companies, entered into a joint venture with the USSR Air Force to lease four aeroplanes to carry cargo around the world, particularly livestock and heavy machinery. The name Antonov Airlines was used. This entity operated for about two years. Its planes were maintained at an Air Force Base near Moscow. It paid a licence fee to the USSR Air Force. According to Vladimir, he was responsible for negotiating contractual and financial arrangements for this entity. 25 Vladimir also gave evidence that between 1985 and 1989, the D'Jamirze family kept a permanent suite of rooms at the Hotel Rossiy in Moscow. (It may be that this continued through until 1991). Vladimir says he was introduced to Mr. Fedotov by the security chief of the hotel. 26 Vladimir gave evidence that in 1991, Rasvitie Russia was experiencing cash flow difficulties, and need to pay about $US700,000.00 to the USSR Air Force for licence fees. In a conversation with Mr. Fedotov, Mr. Fedotov had said that he had money in a bank, was concerned about losing it, and was looking for a suitable business investment. According to Vladimir, he told Mr. Fedotov about the $US700,000.00 arrears of licence fees, and discussed a loan of that amount, also saying words to the effect: "If you are worried about the security of Russian banks, we can offer you security over our home in Australia". According to Vladimir, shortly afterwards Mr. Fedotov said to him that he had discussed the matter with his brother and decided to proceed. 27 According to Vladimir, the document was prepared, signatures from his brothers were obtained, he and Mr. Fedotov put on the final signatures, $US700,000.00 in roubles was collected in cash from Mr. Fedotov's bank, placed in two large suitcases, and couriered to the Soviet Air Force. 28 Vladimir also gave evidence that, shortly after Mr. Fedotov came to Australia, he gave him the certificates of title. Evidence was given on the voir dire concerning authorisation from other members of the family, but this was never admitted into evidence in the case. According to Vladimir, the title deeds thereafter remained in the house, at some stage in a filing cabinet, another stage in a drawer, and at another stage in a safe. 29 Victor gave evidence that he was the chairman of Razvitie Russia, and responsible for its day to day operations. There is in evidence an advertisement placed in the Australian Financial Review for Antonov Airlines, showing Victor as the chairman. Victor gave evidence that he was in Moscow in September 1991, a time of great upheaval in Moscow. He gave evidence of conversations with Vladimir concerning the transaction and concerning the signing of the document. He believes that he signed the document in Moscow. 30 Victor, Alexandre, Nickolai and Alick gave evidence of similar conversations with Vladimir, and that they signed the document. However, their evidence was unclear as to whether the document was signed in Moscow, or in Australia, or possibly in an aircraft. The passports of the brothers were subpoenaed, but only those of Vladimir, Alexandre and Nickolai are in evidence. It is fair to say that the passports of Vladimir and Alexandre tend to support the view that they were in Moscow in September 1991. Nickolai's passport indicates an arrival in Australia on 15th July 1991, and a departure from Australia on 5th October in a year which would appear to be 1991. One further particular piece of evidence that I note is that Alick gave evidence to the effect that the transaction was discussed many times in many different places. 31 Mikhail gave evidence that his signature was on the document, but he could not recall any circumstances. He could not recall whether he left Australia in 1991. 32 Mr. Fedotov gave evidence that he first met members of the D'Jamirze family in about mid-1991. However, in his oral evidence, he said that he was aware that Vladimir and Victor were in Moscow in September 1991, but not whether the other brothers were. In his affidavit, Mr. Fedotov said that at his initial meeting, he arranged with Vladimir to meet later, and they did so at the offices of Razvitie in a suburb of Moscow. At this meeting, Vladimir told him that they need $US700,000.00, and offered two houses and land in Sydney, Australia for security. According to Mr. Fedotov, after some discussion, he agreed. 33 According to Mr. Fedotov's affidavit, this conversation took place on a Friday. On the Monday, he withdrew roubles equivalent to $US700,000.00 from his bank in cash, and it was placed in a bag. In oral evidence, he said the application to withdraw was made on a Monday, the actual withdrawal on the Tuesday, and the money placed in two bags. He said that in return for the money he obtained the document, which contained all the signatures except Vladimir's and his own, and they both then signed the document. 34 Mr. Fedotov then gave evidence that shortly after arrival in Australia, Vladimir handed him the title deeds, and they were kept in a filing cabinet after that time. He also gave evidence that he went to Russia in 1998 to find documents relating to the transaction, but that the relevant bank had closed. 35 It should be recorded that Mr. Fedotov's affidavit was drafted by the solicitor for all defendants, including Mr. Fedotov, Mr. Spedding, on instructions Mr. Spedding obtained from Vladimir. The draft was sent out to Mr. Fedotov. After the draft had been sent out, Vladimir telephoned Mr. Spedding to say it was in order. Mr. Fedotov came to Mr. Spedding with Victor, who translated the document into Russian for Mr. Fedotov who then executed it.

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Submissions 36 Both sides have provided written outlines of submissions, and I will not record them in detail. I will outline matters which strike me as being of significance. 37 Mr. Johnson for the plaintiff pointed out that there was no evidence from any of the D'Jamirze sisters, and made a Jones v. Dunkel submission. 38 In relation to Mr. Fedotov, he submitted that the circumstances of the making of the affidavit, his lack of understanding of what the proceedings were about, and his denial of any discussions of his evidence shortly before the hearing, supported the view that his evidence was prompted by Vladimir and Victor and was of little weight. 39 Mr. Johnson submitted that the Statements of Affairs and the solicitors' letters were not satisfactorily explained by the D'Jamirze brothers, and meant that little weight could be given to their evidence. 40 He submitted that the conversations leading up to the alleged agreement were unsatisfactorily vague, particularly in relation to matters such as interest and the term of the loan. He pointed to the lack of clarity in the evidence as to when the document was signed, particularly by the brothers apart from Vladimir. He pointed to conflicts in the evidence concerning the circumstances of the agreement and the collection of the money. He submitted that the alleged agreement would be a breach of the Deed of about July 1991. 41 He submitted that the agreement was a sham, and referred me to Sharrment Pty. Limited v. Official Trustee in Bankruptcy (1998) 18 FCR 449 at 453-8. 42 In relation to the deposit of title deeds, he submitted that the evidence was insufficient to find an intention to give security or authorisation by persons other than Vladimir. 43 For the defendant, Mr. Moore submitted that it had not been put to the witnesses that the agreement was a sham, nor had alternative versions of the events been put to the witnesses. It was very unlikely that the agreement had been fraudulently concocted. Mr. Fedotov's evidence should be accepted: his recollection was more concrete than those of Vladimir or Victor. Even if all the brothers were not in Moscow at the relevant time, there had been time to send the document to Australia to have them sign it before the transaction was completed. 44 So far as the Statements of Affairs were concerned, they were not completed with great care and attention, and are not evidence against Mr. Fedotov. As regards the solicitors' letters, the D'Jamirze brothers did not indicate any appreciation of what "unencumbered" meant, and it is unlikely that they gave any thought to the Fedotov mortgage and its effect.

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Decision 45 As regards credit, I find I can give little weight to the evidence of the bankrupt D'Jamirze brothers. They all acted irresponsibly in completing their bankruptcy statements. I considered that Vladimir and Victor gave evasive evidence in relation to the solicitors' letters. These problems with the evidence of the D'Jamirze brothers do not count positively against Mr. Fedotov's case, but tend to remove some of the support which their evidence might otherwise give to his case. 46 As regards Mr. Fedotov, there is force in the criticism that has been made of Mr. Fedotov concerning the preparation of the affidavit, and Mr. Fedotov as well as his brothers-in-law, has a very strong interest in the matter. For reasons I will give, I consider it highly unlikely that all the brothers had signed the document by 3rd September 1991, so that I find Mr. Fedotov's evidence that all signatures were on the document when he signed it to be evidence that I cannot accept. However, otherwise I considered his evidence quite circumstantial, and I am inclined to accept the broad substance of that evidence, if not the details. 47 Coming to the circumstances of the Moscow transaction, I accept that the D'Jamirze brothers were involved in running a substantial airline, and incurred a substantial debt to the USSR Air Force, and required a large sum of money to pay it. I accept that Vladimir was in Moscow at the relevant time, and also Victor, having regard to his recollection of the events of that time and to the circumstance that Mr. Fedotov says that he met him at around the time. I think it is probable that Alexandre was in Moscow at the relevant time, having regard to his passport. 48 As regards the others, I am very doubtful that they were in Moscow at the time. Nickolai's passport suggests that he was in Australia, although I cannot entirely rule out the possibility that he travelled as crew on an airline and did not have his passport stamped. Mickhail has been ill for some time, and it seems extremely unlikely that he was in Moscow during the turbulent events of August and September 1991. As far as Alick and Yuri are concerned, there is no particular reason to think they were in Moscow, apart from the evidence of Vladimir and Mr. Fedotov that their signatures were on the document by the time that they signed the document; and Alick's evidence of many discussions about the transaction seems improbable. 49 The written document itself carries some weight. I am not inclined to think that it was fraudulently prepared later. The receipt does not carry any weight by reason of its terms, because it was admitted only as a receipt document obtained by Mr. Fedotov. Having regard to the turbulent events then occurring in Moscow, I do not find it implausible that Mr. Fedotov may have invested $US700,000.00 in this way without enquiry as to the value or title to the Australian properties, or clear agreement about interest or repayment. 50 I do not think the alleged agreement would be a breach of the July 1991 deed, which relates to sale of interests; but in any event, I do not think this would significantly affect the probabilities of what happened, or Mr. Fedotov's rights. I am inclined to accept that Vladimir and Victor signed the document at the time. As I have said, I am inclined to accept the broad substance of Mr. Fedotov's evidence. However, I am strongly of the view that Mickhail had not signed the document by 3rd September: in my opinion it is unlikely in the extreme that the document was prepared on the Friday, sent by plane to Australia over the weekend, and came back available for the completion of the transaction on Tuesday. I am inclined to think that Nickolai, Alick and Yuri did not sign it at the time. I have no strong view as to whether Alexandre signed it at the time. I am unable therefore to accept Mr. Fedotov's evidence as to what signatures were on the document when he signed it. 51 In those circumstances, I find on the balance of probabilities that Mr. Fedotov did advance $US700,000.00 in roubles to enable Razvitie Russia to pay money it owed to the USSR Air Force, and that Vladimir and Victor signed the document in exchange for that advance. However, I am not affirmatively satisfied as to the time when Alick, Yuri or Nickolai signed the document, nor am I satisfied that, at any time prior to signing the document, they became bound by a specifically enforceable agreement to sign such a document. In those circumstances, I find that, subject to other matters to which I will come, the interests of Vladimir and Victor were charged by reason of the transaction, but I am unable to find that the interests of the other three bankrupts were charged at any time before they became bankrupt. 52 I do not believe the deposit of title deeds can take the matter any further. I accept again the broad substance of Mr. Fedotov's evidence, but I am not satisfied by that evidence as to the time of delivery, in particular whether it occurred prior to 1st February 1994, the date of the last relevant act of bankruptcy. There is no evidence of authority, so that it seems to me that at best, the deposit could affect the interest only of Vladimir.

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(4) Sections 27 and 28 and this section do not apply to an instrument or a copy of an instrument tendered as evidence on behalf of a party (not being a person who is primarily liable to duty in respect of the instrument) if the court is satisfied: (a) that the party has informed, or will in accordance with arrangements approved by the court inform, the Chief Commissioner of the name of the person primarily liable to duty in respect of the instrument; and (b) that the party will, in accordance with arrangements approved by the court, lodge the instrument or a copy of the instrument with the Chief Commissioner. 54 It was submitted by Mr. Johnson that, prior to stamping, the document of 3rd September 1991 had no effect in law or equity to confer any title on Mr. Fedotov: see Ash Street Properties Pty. Ltd. v. Pollnow (1987) 9 NSWLR 80. Accordingly, prior to stamping, by operation of Commonwealth legislation (Bankruptcy Act 1996), the beneficial interests of the bankrupt defendants vested in The Official Trustee, and subsequent stamping was not effective to divest or otherwise affect The Official Trustee's title under that legislation. 55 This submission has some apparent support from statements in various judgments suggesting that, until an instrument is stamped, it has no legal effect: see Dent v. Moore (1919) 26 CLR 316, Eagle Star Trustees Ltd. v. Taiping Trading Pty. Limited SCNSW, Powell, J., 3/12/90; Australian Property & Management Pty. Ltd. v. Devefi Pty. Limited SCNSW, Young, J., 7/4/97; Ash Street Properties per Mahoney, JA at p.82. 56 However, all those cases dealt with instruments that had not been stamped at any time, and they did not need to address the particular question of the effect of late stamping. That question was specifically addressed and authoritatively determined in Shepherd v. Felt & Textiles of Australia Pty. Limited (1931) 45 CLR 359, to the effect that once an instrument is stamped, it is as efficacious as from execution as if it had never fallen within the operation of s.29 of the Stamp Duties Act. 57 The leading judgment on this point is that of Dixon, J, with whom Starke and McTiernan JJ agreed. Dealing with an argument that, at the time of the breach alleged in that case, the relevant agreement was unstamped and therefore inefficacious, Dixon, J said this (at pp.382-3): There remains the contention that, conceding the application of sec.27 to an instrument bearing a sufficient but uncancelled stamp, and conceding the payment of the correct amount of "the unpaid duty and the fine payable by law", nevertheless the document was not efficacious at the time of the alleged breach, which therefore could not be wrongful. This argument depends upon sec.29 of the Stamp Duties Act, the material words of which are: "Except as aforesaid, no instrument ... shall ... be pleaded or given in evidence, or admitted to be good, useful, or available in law or in equity for any purpose whatsoever, unless it is duly stamped in accordance with the law in force at the time when it was first executed". The words "except as aforesaid" qualify the whole section, and it is evidence that whatever is comprised within them is not vitiated by its provisions. The words refer to the preceding sections, including sec.25, which allows instruments to be stamped after execution and upon payment of a fine if more than a month has elapsed, and sec.27, which authorizes the reception in evidence of an instrument although there is some omission or insufficiency of the stamp thereon, if the amount of the unpaid duty and the fine payable by law is paid to the officer of the Court. Further, the condition expressed in the section upon which the usefulness of the instrument is made to depend is not introduced by the word "until" but by the word "unless". It is not to be pleaded or given in evidence or admitted to be good, useful or available unless it is duly stamped. The expressions "pleaded", "given in evidence", and "admitted" refer to the use or the recognition of the document or of its operation in judicial proceedings or otherwise, and, I think, would naturally be understood as intending that when by due stamping it had become pleadable, receivable in evidence and admissible as good, useful and available, then its validity and operation as from the beginning were to be construed as unaffected by the enactment.

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The judgments of Rich and Evatt JJ were to somewhat similar effect. 58 Plainly, this means that an unstamped instrument is not of absolutely no effect until stamped: the use of the word "until" in some of the cases noted earlier is obiter, and contrary to the ratio of Shepherd. Until stamped, an instrument has whatever effect is consistent with the proposition that, if stamped, it will be fully effective ab initio. To put this another way, Shepherd must mean that an instrument is effective from the start conditionally upon being stamped before relied on in court, or alternatively, from the start carries the potentiality of being so effective. 59 This approach is confirmed by the express disapproval in Shepherd of the case of Wagga Finance Co. v. Lever (1929) 30 SR(NSW) 76. In that case, it had been held that the tort of detinue was not committed by a refusal of a demand for goods made by a person whose title depended on an unstamped instrument. The disapproval of that case must mean that it was decided in Shepherd that the unstamped instrument was, at the time of the demand, sufficient to make refusal of the demand detinue, provided that the instrument was stamped before being relied on in court. 60 This general approach is also confirmed by In Re Delny Fodders (1973) 4 SASR 538; Commercial Banking Co. of Sydney Limited v. Love (1975) 133 CLR 459; and Re Douglas; Ex Part Starkey (1987) 75 ALR 97. In the last case, a bill of sale had been executed in August 1986, and stamped in December 1986. The assignor executed a Deed of Assignment under the Bankruptcy Act in March 1987. The trustee sought to set aside the bill of sale as a preference given within six months before the execution of the Deed of Assignment, pursuant to s.122 of the Bankruptcy Act 1966. Pincus, J held that, once stamped, the bill of sale was effective from August 1986, more than six months before execution of the deed of assignment. 61 In my opinion, it follows that, when Vladimir and Victor became bankrupt, their interest in the properties passed to The Official Trustee, subject to the mortgage to Mr. Fedotov which was effective conditionally upon being stamped, or alternatively subject to the potentiality of this mortgage becoming effective from its date in the event of its being stamped. Accordingly, upon the instrument being stamped, the condition was satisfied and/or the potentiality became an actuality. This did not involve the divesting of an interest already vested in The Official Trustee, but merely the removal of a condition from a limitation on that interest.

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