Vines (Trustee), in the matter of the Bankrupt Estate of Mitchell v The Edge TC Pty Ltd

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. I certify that the preceding fifty (50) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Jackson.

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Judgment (24 paragraphs)

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Legislation Cited (3)

Cases Cited (3)