These proceedings relate to a dispute concerning a contract for sale of land at 13 John Street, Lidcombe ("the Property"). The Property is owned by the First Defendant, Cumberland Council ("the Council").
The First Plaintiff is A-Link Technology Pty Ltd ("A-Link"). The Second Plaintiff is Sydney Constructions & Developments Pty Ltd ("SCD"). The sole director of both companies is Yasser Nasser: see pages 4 and 19 of Exhibit PW-1 to the Affidavit of Patrick Joseph Wiggins of 24 November 2020, a Special Counsel at Paramonte Legal who has carriage of these proceedings for the Second Defendant. Mr Nasser was appointed director of both A-Link and SCD on 18 November 2020, and is the sole shareholder of A-Link. Prior to this date a Ms Zenah Osman was the director of both. Mr Salim Mehajer (who is a former councillor of the Council, the sole shareholder of SCD and Ms Osman's brother) is associated with both companies. I will say more about Mr Mehajer and his role in these proceedings later in these reasons.
The Second Defendant is Ronney Oueik, a former councillor of the Council.
The substantive proceedings were commenced on 16 September 2020 and concern a contract for sale of land which was entered into between the Council and SCD on 30 July 2013 ("the 2013 Contract"). A-Link claims that the Council misled it concerning a development application and had no right to rescind and wrongfully rescinded the 2013 Contract. A-Link claims that the 2013 Contract is still on foot. The Plaintiffs seek an order for specific performance and for payment of damages of approximately $56M.
There is nothing in the pleadings to reveal SCD's claim against the Council or Mr Oueik. A-Link is described as "nominee" in prayer 1 of the relief section of the Statement of Claim filed 16 September 2020 ("STOCL"). The meaning of "nominee" or the basis on which A-Link became a "nominee" is not pleaded. There is a real doubt as to whether A-Link is a proper party to the proceedings.
I further note that the STOCL lists the Plaintiffs' legal representative as "to be advised". The contact email given is that of Mr Mehajer as "PA to Zenah Osman".
On 4 December 2020 her Honour Ward CJ in Eq listed two motions before me to be heard on 9 December 2020, namely:
1. The First Defendant's Notice of Motion filed on 20 November 2020 by which the Council seeks:
1. an order that the Plaintiffs are to furnish security for the Council's costs in the amount of $320K. The amount sought was revised based on an error in Senior and Junior Counsel's rates: see Annexure A of the Affidavit of Belinda Lennox dated 7 December 2020 and paragraph 1 of the Council's Written Submissions ("FDWS"). The Council now seeks an amount of $314K;
2. an order that the Plaintiffs pay the Council's costs of the motion; and
3. an order pursuant to r 2.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") or s 61 of the Civil Procedure Act 2005 (NSW) ("Civil Procedure Act") that "no further step in the proceedings is to be taken by the Plaintiffs until they appoint a solicitor pursuant to UCPR r 7.1(2)(a)" and that "should each Plaintiff not be represented by a solicitor who enters on to the record within 14 days of this order, the proceedings be dismissed with costs."
1. The Second Defendant's Notice of Motion filed on 24 November 2020 by which Mr Oueik seeks an order that the Plaintiffs are to furnish security for his costs of and incidental to these proceedings in the amount of $342,746.25 and an order that the Plaintiffs pay his costs of the motion.
Ward CJ in Eq on 4 December 2020 made an order for the Plaintiffs to serve any affidavit evidence by 4:00pm on 7 December 2020 and for the parties to provide to my Associate brief written submissions by 2:00pm on 8 December 2020. I received written submissions from the Council ("FDWS") and from Mr Oueik ("SDWS"). The Defendants were required by her Honour to inform the Plaintiffs of the orders made and they have done so: see Annexure E to the Affidavit of Ms Lennox of 7 December 2020.
The Council relies on the Affidavits of Ms Lennox of 20 November 2020 and 7 December 2020 (Ms Lennox is the solicitor on record for the Council). Mr Oueik relies on the Affidavits of Mr Wiggins of 24 November 2020 and 7 December 2020. Submissions were received from Mr M. Sheldon of Counsel for the Council and from Mr C. D. Wood SC for Mr Oueik in accordance with the timetable set down by her Honour on 4 December 2020.
The Plaintiffs have served no evidence nor have they provided written submissions to the Court, nor has any representative contacted my Associate ahead of 9 December 2020.
On 8 December 2020 my Associate sent an email containing the audio-visual link for the hearing to the parties and to Mr Mehajer (whose email is listed as the Plaintiffs' contact on the STOCL) and Ms Osman. In this email Mr Mehajer was asked to provide the contact details of any legal representatives appointed to appear for the First and Second Plaintiffs or alternatively provide the email address for Mr Nasser (which was not on the file). A response was received from Mr Wiggins, solicitor for Mr Oueik, who provided Mr Nasser's email address and advised:
"I understand that Mr Mehajer is presently incarcerated. I do not know whether he has access to emails."
The audio-visual link details for the hearing were provided to Mr Nasser at the email address provided by Mr Wiggins. No response to my Associate's email was received from Mr Nasser (or from Mr Mehajer or Ms Osman).
On 9 December 2020 at 2:15pm there was no appearance on behalf of either of the Plaintiffs. The matter was called via the audio-visual link and outside the Court room. No communication was received by the Court from Mr Nasser, Ms Osman or Mr Mehajer.
I do note, however, that in an email dated 3 December 2020 from Ms Osman to Ms Belinda Lennox (solicitor at Storey & Gough, the firm representing the Council) Ms Osman states:
"Apprently the new appointed director wants to resign. I have no idea whats going on. Salim is incarcerated and its hard to determine why he wants to resign.
He does not wish to be contacted. What will happen now in this case?"
(see Annexure D to the Affidavit of Belinda Lennox of 7 December 2020).
[2]
Financial Position of the Plaintiffs
A-Link owns one property, namely 19 John Street, Lidcombe which was purchased on 25 June 2013 for $500K: see Affidavit of Belinda Lennox dated 20 November 2020 at paragraph 12 and Annexures B and C. There are two mortgages registered on the 19 John Street title which secure loans of $880K and $6.2M. There are five caveats on the title and a PPSR search shows there are a number of security interests registered over A-Link: see paragraphs 14 to 18 and Annexures F to K of the Affidavit of Belinda Lennox dated 20 November 2020.
SCD is the owner of one property, namely 21 John Street, Lidcombe which was purchased for $1.8M on 12 April 2012. There are two mortgages registered on the title (stamped to a total of $7.2M), a number of caveats registered on title, and a number of security interests registered over the company: see the Affidavit of Belinda Lennox dated 20 November 2020 at paragraphs 19 to 24 and Annexures M to T.
Mr Sheldon at paragraph 14 of the FDWS contends that the "overwhelming inference is that nothing the plaintiffs could have said in correspondence, evidence, or in compliance with the notices to produce could have assisted them on this application" and that "the Court should accept that the documents demonstrate, on their face, that neither plaintiff has assets sufficient to meet an adverse costs order."
Mr Wood SC at paragraph 13 of the SDWS states he is "informed by [Mr Oueik] and believe that he is concerned that the plaintiffs may be attempting to divest their assets to a related party to avoid the consequences of these proceedings". On 25 November 2020 Mr Nasser emailed Mr Wiggins and Ms Lennox (at Annexure C of the Affidavit of Mr Wiggins of 7 December 2020):
"As you are aware, properties at 19-21 John Street Lidcombe NSW 2141 have been sold to a related party to the previous director of SCD/ALINK".
There has been no evidence from Ms Osman, the former director of the Plaintiffs, or from Mr Nasser, the current director of the Plaintiffs, as to their current financial position.
[3]
Mr Mehajer
Mr Mehajer (who, as I have noted, is a former councillor of the Council and Ms Osman's brother) was formerly a director of SCD and is a 100% shareholder of SCD.
Mr Mehajer is an undischarged bankrupt (and has been since March 2018) and was banned from being a director by ASIC: see the Affidavit of Belinda Lennox dated 20 November 2020 at paragraphs 8 and 9 and Annexure A, and see also Mehajer and Australian Securities and Investments Commission [2016] AATA 621. The Administrative Appeals Tribunal found that Mr Mehajer was aware that proofs of debt lodged with the liquidator had been forged, but did not disclose this in affidavits affirmed by him: see [56] to [58].
Mr Mehajer has previously been convicted of electoral fraud: see the Affidavit of Belinda Lennox dated 20 November 2020 at paragraph 33 and see also R v Salim Mehajer [2018] NSWLC 11 in which Magistrate Schurr found that Mr Mehajer had provided false information to the Australian Electoral Commission.
Mr Mehajer has been primarily communicating on behalf of both Plaintiffs (see the Affidavit of Ms Lennox dated 20 November 2020 at paragraph 35). He described himself, in an email to the Council, as "Zenah's brother and assistant in this matter and…a key witness" (see Affidavit of Ms Lennox dated 20 November 2020 at Annexure W) and as I have already stated in the STOCL he is listed as the "PA to Zenah Osman".
In her Affidavit of 7 December 2020 Ms Lennox advises that "I understand from media reports that Mr Mehajer…has been incarcerated since 27 November 2020 and will be until at least February 2021": see paragraph 9.
[4]
Mr Nasser
Mr Nasser is the director of both Plaintiffs, having been appointed on 18 November 2020.
The residential address registered with ASIC for Mr Nasser is, and has been since January 2020, a vacant development site: Affidavit of Belinda Lennox dated 20 November 2020 at paragraph 39 and Annexure Y. No information, other than that he is a director of the Plaintiffs, has been provided about Mr Nasser. Mr Sheldon in the FDWS at paragraph 24 states "it is unclear who Mr Nasser is."
Mr Nasser was corresponding via email with the parties in late November 2020. Ms Lennox received four emails from Mr Nasser between 19 and 27 November 2020, but since then has not been contacted by Mr Nasser: Affidavit of Ms Lennox of 7 December 2020 at paragraph 5.
In the email from Ms Osman to Ms Lennox dated 3 December 2020, Ms Osman said that Mr Nasser "does not wish to be contacted": Affidavit of Ms Lennox of 7 December 2020 at Annexure D.
[5]
The 2016 Proceedings
In 2016 SCD brought substantially similar proceedings in this Court before Darke J: Sydney Constructions & Developments Pty Ltd v Cumberland Council [2018] NSWSC 304 ("the 2016 Proceedings"), although in those proceedings Mr Oueik was not a defendant.
The 2016 Proceedings were summarily dismissed (only two weeks before the matter was listed for hearing with an estimate of seven days) because of SCD's failure to comply with the Court's orders for discovery. Darke J, having considered the dictates of justice and the provisions of ss 56 and 57 of the Civil Procedure Act, dismissed the proceedings pursuant to s 61(3)(a) of the Civil Procedure Act. At [40] Darke J:
"… As I have said, such a dismissal does not, subject to any terms imposed, preclude the bringing of fresh proceedings. In my opinion, terms should be imposed that no such proceedings be brought (and no caveats lodged on the title to the land) until the plaintiff pays the defendant's costs of the proceedings. Once that has occurred, and subject to the plaintiff then being in a position to properly prosecute its case, it would then be open to the plaintiff to bring fresh proceedings."
In an email to Ms Lennox of 7 October 2020, Mr Mehajer stated (at Annexure W to the Affidavit of Ms Lennox of 20 November 2020):
"As you are aware, proceedings on the last occasion did not proceed simply because SCD were not ready and did not have all the evidence in order and collated. SCD were relying on myself to collate such evidence. Now, months down the track, SCD/ALINK are ready to proceed…"
I note that in relation to costs of the 2016 Proceedings the Council says that SCD negotiated the payment of those costs out of the deposit held by the Council under the 2013 Contract and that the balance of the deposit was refunded to SCD. I was informed by Mr Sheldon that this is a matter that the Council intends to plead as an answer to SCD's new claim on the basis that it amounts to an abandonment of any claim that the 2013 Contract was not validly rescinded.
[6]
The Plaintiffs' conduct in the proceedings to date
On 12 November 2020 her Honour Ward CJ in Eq granted leave for the Defendants to file and serve Notices of Motion seeking security for costs together with affidavits in support by 20 November 2020. The Plaintiffs were ordered to file and serve evidence in response to the Defendants' Notices of Motion by 27 November 2020. No evidence was filed or served by the Plaintiffs, nor did Mr Nasser respond to either of the two emails send by Ms Lennox asking him to confirm whether the Plaintiffs intended to file any evidence: see Ms Lennox's Affidavit of 7 December 2020 at paragraph 6.
The Plaintiff has not complied with the orders made by her Honour Ward CJ in Eq on 4 December 2020 for the Plaintiff to serve any affidavit evidence by 4:00pm on 7 December 2020 and for the parties to provide brief written submissions by 2:00pm on 8 December 2020.
The Plaintiffs have failed to respond to the Defendants' requests for information on a number of occasions, including:
1. On 20 October 2020 Mr Wiggins wrote to Ms Osman (the then director of the Plaintiffs) requesting information about the Plaintiffs' financial position. No response to this letter has been received: see the Affidavit of Mr Wiggins of 24 November 2020 at paragraph 10 and page 41 of Exhibit PW-1.
2. On 18 November 2020 Mr Wiggins wrote to Ms Osman (Mr Mehajer was copied into the email) requesting "the previous affidavit" sworn by Mr Mehajer referred to in the STOCL at paragraphs 25(c)(i)-(iii). On 19 November 2020 Mr Wiggins made the same request to Mr Nasser who said that he would provide it "if there is one that exists": see pages 52 to 54 of Exhibit PW-1. The documents have not yet been received.
The Plaintiffs have failed to respond to Notices to Produce issued by solicitors for Mr Oueik:
1. On 19 November 2020 Mr Oueik's solicitors served a Notice to Produce on SCD requiring production by 3 December 2020 of:
1. a complete copy of the Contract of Sale of Land for 21 John Street, Lidcombe; and
2. a copy of the Affidavit of Salim Mehajer referred to in paragraph 25(c)(i) of the STOCL.
SCD has not produced any documents in response to that Notice to Produce: see paragraph 2 of the Affidavit of Mr Wiggins dated 7 December 2020 and Annexure A.
1. On 25 November 2020 Mr Oueik's solicitors served Notices to Produce on A-Link and SCD seeking information as to their financial position be produced by 9 December 2020. Neither A-Link nor SCD has produced any documents in response to the Notices to Produce: see paragraph 3 of the Affidavit of Mr Wiggins dated 7 December 2020 and Annexure B.
The evidence comprehensively establishes that there is a very real basis for concern that the Plaintiffs if unsuccessful in the proceedings and ordered to pay the costs of the Defendants will not be able to do so. This conclusion arises not only because the Plaintiffs have failed to answer Notices to Produce concerning their financial position and have failed to attend on 9 December 2020 to resist the Defendants' motions, but also because of evidence adduced by the Defendants in the Affidavits of Ms Lennox and Mr Wiggins.
I am satisfied that the basis for an order for security pursuant to UCPR r 42.21 is made out.
The next question is whether an order should be made. No reason is advanced by the Plaintiffs as to why an order for security should not be made pursuant to r 42.21 of the UCPR. There are a number of matters which the Court may have regard to and which are set out in r 42.21(1A). I shall address these seriatim:
1. On the present pleadings the prospect that A-Link and SCD could succeed are slender indeed. In relation to SCD there has already been a case which was aborted following a failure to provide discovery: see the decision of Darke J in the 2016 Proceedings. The Defendants have sought and not been provided with an affidavit referred to in the STOCL. SCD's case appears to be based on alleged representations which are denied. Mr Mehajer's credit will be important - and as I have noted in [21] and [22] above Mr Mehajer has been convicted of electoral fraud and has been disqualified from managing corporations, in part for failing to reveal in an affidavit that the proofs of debt lodged were forgeries. These matters and the unwillingness of A-Link and SCD to provide documents to which the STOCL has referred significantly undermines confidence as to A-Link and SCD's prospects of success.
2. What I have said in (a) impacts upon the genuineness of the proceedings as well.
3. I have already dealt with the issue of impecuniosity of the Plaintiffs.
4. There is no evidence to support any contention that the Defendants have caused the Plaintiffs' impecuniosity.
5. The Plaintiffs are not effectively defendants.
6. An order for security might stultify the proceedings but no contention of stultification has been advanced and there is no evidence of the financial position of Mr Nasser, the sole director of both companies and a shareholder of A-Link, which is a relevant consideration: see Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1 at 4; (1984) 52 ALR 176, and see also The Owners - Strata Plan 87265 v Saaib [2019] NSWSC 289 at [28]-[31] per Stevenson J. Mr Mehajer, the sole shareholder in SCD, is an undischarged bankrupt who, I will assume, has no ability to fund the proceedings.
7. No matter of public importance is demonstrated.
8. No admission has been made nor any money paid out.
9. The events in question in the proceedings are not recent and the Plaintiffs have delayed in commencing them.
10. The costs of the proceedings are likely to be substantial.
11. The amount of security sought is proportionate to the very substantial amount claimed.
Rule 42.21(1A) (l), (m) and (n) are not relevant. The applications for security have been brought very early in the proceedings.
In my view it is appropriate for the Court to order that both Plaintiffs provide security to the Defendants.
I turn now to the question of the amount of security. Ms Lennox and Mr Wiggins have both provided detailed support for the amount of security sought. No challenge to the figures has been advanced by the Plaintiffs. Ms Lennox has calculated an amount of approximately $314K (see Annexure A of the Affidavit of Belinda Lennox dated 7 December 2020) but this involves no reduction to arrive at an amount for party/ party costs. Mr Wiggins has arrived at a figure of $342,746.25 using a 75% discount. Mr Wiggins is using a 10 day trial estimate and Ms Lennox a seven day trial estimate. Given that the 2016 Proceedings had a seven day estimate and did not involve a claim against Mr Oueik I think it would be appropriate to assume a 10 day hearing. I accept the figure of $342,746.25 as the amount of security for Mr Oueik and $251K for the Council. In relation to the Council I have applied a 20% reduction rather than a 25% reduction to take into account the likelihood that it is based on an underestimate of hearing time. I shall round down the amount for the Council to $250K and the amount for Mr Oueik to $340K.
Security should be provided in the form of a bank guarantee, payment into Court or payment into a controlled monies account in a form acceptable to the Defendants on or before 2 February 2021.
[7]
UCPR 7.1 Order
The next question is whether the pleadings are properly constituted. Rule 7.1(2)(a) of the UCPR requires that a company "may commence and carry on proceedings in any court by a solicitor or by a director of the company". Rule 7.1(3) provides that "In the case of proceedings in the Supreme Court, subrule (2)(a) authorises a company to commence proceedings by a director only if the director is also a plaintiff in the proceedings."
Neither Ms Osman (as former director) or Mr Nasser (as the current director) have been joined to the proceedings. The proceedings have not been commenced by a solicitor.
The Council seeks an order that the Plaintiffs should be directed to comply with r 7.1 and that the proceedings should be stayed if a solicitor is not appointed and enters on to the record for the Plaintiffs within 14 days.
I note that on 12 October 2020 and again on 3 November 2020 Ms Lennox wrote to Ms Osman (the then director) bringing rule 7.1 to her attention and noting that almost all correspondence regarding this case has been carried out by Mr Mehajer, who is not a director: see Affidavit of Ms Lennox of 20 November 2020 at Annexure X.
Whilst the Plaintiffs currently have not appointed legal representatives, I note that in an email to Ms Lennox and to the Court of 21 October 2020, Mr Mehajer said he would appoint Cristian Fuenzalida and Dr James Renwick SC to appear for the hearing. On 22 October 2020 Ms Lennox called Mr Fuenzalida who advised he "has instructions to act for Ms Osman in other matters" but that he had "no knowledge of the Supreme Court matter": see paragraph 37 of Ms Lennox's Affidavit of 20 November 2020.
The proceedings are not competently constituted at present. I will direct that the proceedings be stayed until 5 February 2021 to allow the Plaintiffs to either appoint a solicitor or join as a plaintiff Mr Nasser (or if Mr Nasser is replaced as director by Ms Osman or some other person, that other person).
[8]
Orders
I will therefore order:
1. The Plaintiffs to provide on or before 2 February 2021 security to the First Defendant in the amount of $250,000 in the form of a bank guarantee, payment into Court or payment into a controlled monies account in a form acceptable to the First Defendant.
2. The Plaintiffs to provide on or before 2 February 2021 security to the Second Defendant in the amount of $340,000 in the form of a bank guarantee, payment into Court or payment into a controlled monies account in a form acceptable to the Second Defendant.
3. The proceedings be stayed until the security ordered in (1) and (2) has been provided and until a director of the Plaintiffs has been joined as an additional plaintiff in the proceedings or until a solicitor has filed a Notice of Appearance for the Plaintiffs.
4. The Plaintiffs to pay the Defendants' costs of the Notice of Motion filed 20 November 2020 and of the Notice of Motion filed 24 November 2020.
[9]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 16 December 2020