Trustee of the property of Kurschinsky v Kurschinsky, in the matter of Kurschinsky

Federal Court of Australia|2024-09-24|Before: Downes J

PENAL NOTICE TO: THE RESPONDENT IF YOU, ALEXANDER KURSCHINSKY: (A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR (B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT. ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED. THE COURT ORDERS THAT:

The respondent deliver up vacant possession of the property recorded as Lot 73 on Group Titles Plan of Resubdivision 2713, Title Reference 18176095 and known as Unit 70, 3 Costata Street, Hillcrest, 4118 in the State of Queensland (Property) to the applicant within 21 days.
The respondent remove from the Property all personal property, including vehicles, rubbish and other chattels (personal property) which are not vested in the applicant within 21 days.
In the event that the respondent fails to comply with Order 2 above, the applicant is empowered to remove and dispose of the personal property on the Property as the applicant sees fit.
Within 14 days of this Order, the respondent file with the Official Receiver a statement of his affairs and provide a copy of the statement of affairs to the applicant.
The costs of these proceedings be paid to the applicant in priority out of the property of the bankrupt estate of the respondent, being costs, charges and expenses of the administration of the bankruptcy in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT DOWNES J:

Synopsis

This is an application brought by the trustee of the bankrupt estate of Mr Alexander Kurschinsky (bankrupt) (the Trustee) seeking orders as follows:
Pursuant to section 30(1)(b) of the Bankruptcy Act 1966 (Cth), Mr Kurschinsky is directed to, within 14 days of this Order, vacate and grant the Trustee possession of Lot 73 on Group Titles Plan of Resubdivision 2713, Title Reference 18176095 situated at Unit 70, 3 Costata Street, Hillcrest, QLD, 4118 (the Property).
Pursuant to s 54 of the Bankruptcy Act, Mr Kurschinsky is directed to, within 14 days of this Order, file with the Official Receiver a statement of his affairs and furnish a copy of the statement to the Trustee.
Any other order that the Court considers appropriate.
The costs of these proceedings be paid to the Trustee in priority out of the property of the bankrupt estate of Mr Kurschinsky, being costs, charges and expenses of the administration of the bankruptcy in accordance with section 109(1)(a) of the Bankruptcy Act.
At the hearing of this application, the Trustee sought to rely upon a list of material which appears on the first page of the Trustee's outline of submissions. Mr Kurschinsky objected to the Trustee relying on three affidavits, which are numbered 7, 8 and 9 in that list, on the basis that they were served on him on Monday 16 September 2024 and Tuesday 17 September 2024 (with the hearing on 18 September 2024) and that he had not had time to consider their contents. On that basis, and as the Trustee indicated that it was not essential that he rely upon those affidavits, I did not permit the Trustee to rely upon these affidavits at the hearing. I note that neither party sought an adjournment of the hearing.
Before addressing the application, it is necessary to have regard to some of the history of events leading up to and following the bankruptcy of Mr Kurschinsky.

Relevant background

Mr Kurschinsky is a former solicitor. On 3 June 2020, Daubney J (then President of the Queensland Civil and Administrative Tribunal or QCAT) recommended that the name of Mr Kurschinsky be removed from the roll of legal practitioners in Queensland: Legal Services Commissioner v Kurschinsky [2020] QCAT 182.
The recommendation was made following three disciplinary applications brought pursuant to the Legal Profession Act 2007 (Qld) by the Legal Services Commissioner which were based upon eight charges.
Relevantly to this case, charges 6, 7 and 8 arose out of Mr Kurschinsky's conduct in the course of proceedings in the Federal Circuit Court (as it then was) between Ms Darleen Worthington and Mr John Henry. It is convenient to set out certain paragraphs of the decision of Daubney J in these reasons as they provide a summary of the facts relevant to the charges, but which also provide relevant background to this proceeding: [41] …The application before the Federal Circuit Court sought that orders be made in respect of the alteration of property interests between Mr Henry and Ms Worthington on the basis of an alleged de facto relationship between them. By the application, Mr Henry sought, amongst other things, to receive approximately $190,000 held in the respondent's trust account from the sale of a property which had been owned by Ms Worthington. … … [48] … on 2 November 2016 the judge made a declaration that Mr Henry was not the de facto partner of Ms Worthington, and ordered that the sum of $197,266.77 held in the trust account of Kurschinsky Law be released to Worthington within seven days. That latter order prompted the emails referred to under Charge 6. [49] By 8 November 2016, the trust funds had not been released to Ms Worthington. Indeed, what happened was that on 8 November 2016 Mr Henry gave a written instruction to Kurschinsky Tax Pty Ltd by which he stated that he wished to "redeem all funds held in your trust account in my name". He was then paid the entirety of the monies. [50] On 20 January 2017, a further hearing in respect of the non-compliance with the orders took place before Judge Vasta. ... … [52] Initially in the course of his oral evidence, he confirmed that the $197,133.17 which had been paid to the Kurschinsky Law trust account was held on trust for Ms Worthington and Mr Henry, and the monies were to be held pending resolution of the family law dispute between those parties. [53] Under questioning from his Honour, however, the respondent soon departed from that simple proposition and was reluctant to accept that the money paid into the law firm's trust account had been identified as being held on trust for Ms Worthington. He said: It was just simply money that was held and we redeemed it and Mr Henry had it placed into the other trust account. … [56] He agreed that the money in the Kurschinsky Tax Pty Ltd trust account was held, for all intents and purposes, on the same terms and conditions as in the Kurschinsky Law trust account. Despite that, the respondent gave no sensible answer as to how it was that the funds were paid out of the Kurschinsky Tax Pty Ltd trust account to Mr Henry without authority from Ms Worthington. … [57] This evidence by the respondent was unsatisfactory and gravely concerning on a number of levels. First, in numerous respects it was simply misleading and inaccurate. The respondent sought to paint Kurschinsky Tax Pty Ltd as being an independent entity, without properly disclosing to the judge that he was, in fact, the company's sole director and shareholder. [58] Moreover, his evidence in relation to the justification for permitting the monies to be paid to Mr Henry lacked any proper rationale. Despite acknowledging that the monies were held on trust for both Ms Worthington and Mr Henry, the respondent avoided providing any sensible answer to the judge's questions concerning the payment out of the monies to Mr Henry. … [60] This highly unsatisfactory and, in part, patently false evidence is the basis for Charge 7. The Tribunal is satisfied that, for the purposes of Charge 7, the respondent made false and misleading statements to Judge Vasta when giving evidence on 20 January 2016.
There was no appeal from the decision of the QCAT. Mr Kurschinsky submits that he has "never been served with any documents" from the QCAT hearing and that he is "going to be pursuing that as well." However, it appears that the QCAT orders and reasons were before Logan J in the proceedings referred to below.
In any event, it appears from the evidence before me that the Queensland Law Society (QLS) paid Ms Worthington certain monies from the Fidelity Fund from the balance of what was claimed to be a wrongful payment from the trust account referred to in the QCAT decision, being a payment which was contrary to the terms of an order of Judge Vasta. In order to recoup what had been paid to Ms Worthington, the QLS then brought proceedings against Mr Kurschinsky in the Queensland Magistrates Court and, on 11 February 2022, the Magistrates Court ordered that Mr Kurschinsky pay to the QLS the sum of $60,239.05 inclusive of interest and also ordered that Mr Kurschinsky pay the QLS's costs.
Mr Kurschinsky did not pay the QLS and the QLS caused a bankruptcy notice to be issued. On 24 May 2023, a Registrar of this Court, exercising delegated authority, dismissed an application by Mr Kurschinsky to set aside that bankruptcy notice. This led Mr Kurschinsky to bring an application for review of those orders before a judge of this Court. That hearing took place on 8 November 2023, resulting in a decision of that date which dismissed the application: Kurschinsky v Queensland Law Society [2023] FCA 1682 (Logan J).
In that case, Logan J continued the chronology, and it is convenient to replicate aspects of his reasons: [18] Mr Kurschinsky's application for review entailed two principal bases of challenge upon which he submitted that the bankruptcy notice should be set aside. Each of these were said to be a basis upon which in terms of s 40(1)(g) of the Bankruptcy Act, the Court would be satisfied that he had a counter-claim set-off or cross-demand equal to or exceeding the amount of the judgment debt upon which the bankruptcy notice was founded. It was also, as I understood it, part of his submission that in any event the judgment concerned had been obtained by fraud. It was thus submitted to be an abuse of process by the Law Society to seek the issue of a bankruptcy notice or, in any event, that the judgment was one given in circumstances where the magistrate concerned had acted in a way which constituted a breach of judicial duty such that it would be an affront to the purposes of the Bankruptcy Act to permit the bankruptcy notice to remain unset aside. … … [25] The underlying judgment is that of the Queensland Magistrates Court given on 11 February 2022. On that day, the Magistrates Court ordered that Mr Kurschinsky, as defendant, pay to the Law Society, as plaintiff, the sum of $60,239.05, inclusive of interest. The Magistrates Court also dismissed, that day, a counter-claim of Mr Kurschinsky filed on 30 September 2021 in that court. The Magistrates Court further ordered that Mr Kurschinsky pay the Law Society's costs. ... … [27] It is apparent from the affidavit evidence taken to be filed in relation to the review application that Mr Kurschinsky failed to appear before the Magistrates Court on 11 February 2022. That absence of appearance provided the occasion for the dismissal of his counter-claim. The magistrate then heard and determined an application by the Law Society for summary judgment. The essence of the Law Society's claim pursuant to r 2.92 of the Uniform Civil Procedure Rules (Qld), was one by subrogation in respect of moneys paid to a Ms W from the Fidelity Fund arising from being the balance of what was said to be a wrongful payment from Mr Kurschinsky's trust account at the time when he was a solicitor in Queensland into a related company trust account and in turn to a Mr H. [28] There had been in the Circuit Court proceedings on the basis of an alleged de facto relationship as between Mr H and Ms W. Ms W had a property the proceeds of sale of which were, in the course of the Circuit Court de facto proceedings ordered to be paid into Mr Kurschinsky's trust account, pending the outcome of those proceedings. It is apparent that the Law Society took the view, upon a claim being made on the Fidelity Fund by Ms W, that Mr Kurschinsky had applied the funds from his trust account without her authority, although he may have had authority from Mr H. … [30] Mr Kurschinsky sought to challenge the Magistrates Court judgment by a notice of appeal filed in the District Court of Queensland on 10 March 2022 (appeal D581 of 2022). … [31] It is apparent from subsequent orders in the District Court that Mr Kurschinsky did not prosecute his appeal with due diligence. An order was made on 21 June 2022 by the District Court requiring him to file and serve an outline of argument by a particular time with leave reserved to the Law Society and another named respondent unnecessary to mention to apply to strike out the appeal in the event of default. As it happens, there was a default. That culminated in an order made by the District Court on 16 September 2022 dismissing Mr Kurschinsky's appeal against the Magistrates Court judgment. … [33] The nature of the defamation proceeding is revealed by a statement of claim in the Queensland Supreme Court in proceeding 5755 of 2023. Mr Kurschinsky is or rather was plaintiff in that proceeding. Two defendants were named, a Mr Moses and the Law Society… [That] particular proceeding has been dismissed by the Queensland Supreme Court. [34] There is, as recently as this week, another proceeding instituted by Mr Kurschinsky against the Law Society in the Queensland Supreme Court. On 6 November 2023, he instituted proceeding 14039 of 2023 by which he named the Law Society as third defendant, Mr Rodgers, who is a solicitor for the Law Society, and an entity apparently related to Mr Rodgers' firm as additional defendants. That alleges what is said to be an abuse of process claim in that, so it is alleged, in about February 2021, the defendants "started legal proceedings against the plaintiff seeking recovery of $57,941.55 by which the third defendant (Law Society) had paid an amount to a Ms W from 'her fraudulent time expired claim against the third defendant's' (Law Society's) Fidelity Fund". [35] The particulars to this claim rehearse a grievance of Mr H in respect of Ms W and also the way in which the de facto property proceedings were dealt with both in the Circuit Court and on an appeal to the Full Court of the Family Court. Other particulars so-called allege all sorts of failures on the part of various officers of the Law Society. [36] Included in the affidavit material before me are letters of complaint by Mr Henry to the Law Society as well as related responses by the Law Society. [37] Also included in the affidavit material are the reasons of the Queensland Civil and Administrative Tribunal of 3 June 2020 in respect of proceedings between the Queensland Legal Services Commissioner and Mr Kurschinsky, Legal Services Commissioner v Kurschinsky [2020] QCAT 182. … [38] It is apparent from the accompanying published reasons that part of the occasion for the making of those orders was findings made by QCAT in respect of impropriety on the part of Mr Kurschinsky with respect to the transference of funds from his then solicitor's trust account without Ms Ws authority. … … [40] … while it is not necessary for Mr Kurschinsky to prove as if this were a trial on the merits his alleged abuse of process claim, he must at least provide some evidence so as to satisfy the Court of the existence of a claim, set-off or cross-demand equal to or exceeding the Magistrates Court judgment debt. There is just no such evidence. All that there is are what one might term "conspiracy theories" of improper conduct on the part of various Law Society officers, the Society's solicitors, a Circuit Court judge who entertained the de facto property proceedings, a then judge, if not judges, constituting a Full Court of the Family Court and also, so the submissions went, the magistrate who gave judgment in respect of the Law Society's subrogated claim.
On 29 November 2023, a sequestration order was made, and the Trustee was appointed as the trustee of Mr Kurschinsky's bankrupt estate.
Mr Kurschinsky was notified of the sequestration order on 30 November 2023 by email sent by the Trustee's administrative accountant such that, as a consequence of the operation of s 54(1) of the Bankruptcy Act, Mr Kurschinsky was required to make out and file a statement of affairs with the Official Receiver by 14 December 2023. Since 30 November 2023, the Trustee has taken steps to try and obtain a copy of Mr Kurschinsky's statement of affairs, but has been unsuccessful. To date, Mr Kurschinsky has not provided a statement of affairs.
On 20 December 2023, the Trustee was registered on the title as the owner of the Property.
On 25 January 2024, the Trustee notified Mr Kurschinsky of the Trustee's intention to realise the estate's interest in the Property and required Mr Kurschinsky to vacate the Property by no later than 28 February 2024. On 5 March 2024, the Trustee sought confirmation from Mr Kurschinsky that the Property had been vacated. To date, Mr Kurschinsky has not vacated the Property.
The reasons of Logan J refer to proceedings commenced by Mr Kurschinsky against the QLS in the Queensland Supreme Court. It was common ground at the hearing before me that those proceedings had been dismissed, and that an appeal brought from that dismissal to the Queensland Court of Appeal was dismissed.
By his affidavit, Mr Kurschinsky asserts that Deputy Registrar Cranston had "directed refiling of the appeal." He includes as an annexure an email dated 2 August 2024 which he sent to the Court of Appeal Registry email address, addressed to "Mr S. Cranston, Deputy Registrar, Court of Appeal." However, notwithstanding that more than 6 weeks have passed, no appeal has been "filed" or "refiled".
Mr Kurschinsky also brought an appeal in this Court against the orders of Logan J, being proceedings QUD546/2023. The hearing of that appeal was initially set down for 28 August 2024. By orders dated 12 August 2024, Collier J made orders which vacated that hearing and included these orders:
Orders 1 and 2 of Registrar Rubinstein of 7 June 2024 be vacated, and the following be substituted: "1. By 4.00pm on 30 August 2024 the appellant file and serve on the respondent a draft of Part A of the appeal book.
By 4.00pm on 30 August 2024 the appellant file and serve on the respondent an outline of submissions and chronology of the relevant events". (Substituted Timetabling Orders 1 and 2)
In the event that the appellant fails to comply with Substituted Timetabling Orders 1 and 2, the appeal stand dismissed without further order of the Court. (Emphasis original.)
Mr Kurschinsky filed an affidavit dated 29 August 2024 in proceedings QUD546/2023 which annexes an affidavit filed by him in the Supreme Court of Queensland on 16 November 2023 (being 8 days after the hearing before Logan J, but which affidavit was not relied upon in the hearing before Logan J). That affidavit makes a series of assertions and attaches a number of documents. The documents are variously dated between 2015 and 2019. Mr Kurschinsky accepts that he was aware of the information contained in his affidavit prior to the hearing before Logan J.
Based on this evidence, which I permitted Mr Kurschinsky to rely upon in this proceeding, Mr Kurschinsky submits that the QLS engaged in fraud because it paid Ms Worthington funds out of the Fidelity Fund which she claimed were funds that Mr Kurschinsky had returned to Mr Henry when Mr Kurschinsky had no involvement in that matter. He also submits that Ms Worthington made a false claim against the Fidelity Fund which the QLS paid out and then sought recovery from Mr Kurschinsky in circumstances where Mr Kurschinsky had no trust account, had never paid Ms Worthington and Ms Worthington had defrauded Mr Henry in her claim. Mr Kurschinsky submits that he and Mr Henry told the QLS of the alleged fraud by Ms Worthington but that the QLS nonetheless paid Ms Worthington in any event. Mr Kurschinsky submits that, because of this, the QLS had also committed fraud. Mr Kurschinsky's ultimate position is that the QLS (amongst others) engaged in fraud and that this "renders all this nugatory… it destroys the whole claim by the Law Society, and judgment, and then the bankruptcy".
The appeal from the decision of Logan J has since been dismissed.
Other than this proceeding, there are no extant proceedings on foot in any court.

Order to vacate the Property

Pursuant to s 58 of the Bankruptcy Act, the Property vested in the Trustee when Mr Kurschinsky became a bankrupt. As observed by the Full Court in Ritson v Commissioner of Police (NSW) [2021] FCAFC 208 at [64] (Allsop CJ, Lee and Downes JJ): [A] sequestration order changes, by force of the statute, the status of a debtor, enlivens powers of a trustee and brings about changes to property. Such changes are drastic and immediate...
There is no dispute that Mr Kurschinsky continues to reside at the Property. Such conduct delays the Trustee from realising the estate's interest in the Property (as the Trustee requires vacant possession in order to sell the Property) and erodes the equity in the Property that is available to creditors as a result of further fees being incurred to the body corporate of the Property and to the Logan City Council for outstanding rates.
Contrary to Mr Kurschinsky's submissions, his belief that the QLS and Ms Worthington engaged in fraud does not have the legal consequence that the Property did not vest in the Trustee or that he is entitled to continue to reside in the Property. Further, as matters presently stand, the findings of fact which have been made by the judges referred to above, the lack of any existing proceeding or appeal from those findings, the lack of progress by Mr Kurschinsky to substantiate his claims of fraud against the QLS, the failure by Mr Kurschinsky to take any steps to set aside the sequestration order and the failure by Mr Kurschinsky to offer any undertakings all tell against permitting Mr Kurschinsky being permitted to remain in the Property on an indefinite basis to the detriment of his creditors.
For these reasons, the order sought by the Trustee to require Mr Kurschinsky to vacate the Property will be made. However, I will increase the time for compliance with this order to 21 days to enable Mr Kurschinsky to make appropriate arrangements. The balance of the orders which I will make are standard orders in a case of this kind, and they fall within the scope of the power provided by s 30(1) of the Bankruptcy Act: see, for example, Lo Pilato (Trustee), in the matter of Ghougassian (bankrupt) v Ghougassian (No 3) [2022] FCA 1532 (Markovic J) which at [31] cites Coshott v Prentice (2014) 221 FCR 450; [2014] FCAFC 88 at [94] (Siopis, Katzmann and Perry JJ).

Order to provide statement of affairs

Contrary to Mr Kurschinsky's submissions, his allegations that the QLS and Ms Worthington engaged in fraud does not have the legal consequence that he can avoid his statutory obligation to provide a statement of affairs as required by s 54 of the Bankruptcy Act. Other than his assertion that the bankruptcy had been rendered "nugatory", no other excuse was offered for his failure to comply with his statutory obligation.
For this reason, the order sought by the Trustee and concerning the statement of affairs will be made.

Order as to costs

The order sought by the Trustee is appropriate in the circumstances of this case and will be made. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Downes.

Bankruptcy Act 1966(Cth)ss 30(1), 54, 58, 109(1), 116

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