On 16 June 2023, Mr Hamidul Islam issued a statutory demand to each of Amin Property Group Pty Ltd (ACN 653 888 932) (Amin Property Group), Amin Homes Hadiqat Woolgen Pty Ltd (ACN 648 134 374) (formerly known as MA Signature Homes Pty Ltd - Amin Hadiqat), and Amin Homes Murooj Woolgen Pty Ltd (ACN 654 353 867) (Amin Murooj). Each of the three statutory demands relates to the same alleged debt of $3,250,000 said to be due and payable to Mr Islam under the terms of a Deed of Settlement dated 22 November 2022.
Each of Amin Property Group, Amin Hadiqat, and Amin Murooj commenced a separate proceeding to set aside the statutory demand. The three proceedings were heard together. The same evidence was read and tendered in each proceeding. In these reasons for judgment, I refer to Amin Property Group, Amin Hadiqat, and Amin Murooj collectively as the Plaintiffs.
The Plaintiffs contend that there is a genuine dispute about the existence of the alleged debt because they have a genuine claim for rectification of the provisions of the Deed of Settlement that stipulate the times at which they are required to make the payments to Mr Islam totalling $3,250,000. Further or alternatively, the Plaintiffs contend that they have a genuine offsetting claim against Mr Islam for alleged breach of fiduciary duty.
Mr Islam contends that the Plaintiffs' rectification claim does not raise a genuine dispute, and that the Plaintiffs do not have a genuine cross-claim against him.
For the reasons that follow, I have determined that each of the statutory demands must be set aside because the Plaintiffs' rectification claim constitutes a genuine dispute about whether the debt claimed in the statutory demands is presently due and payable. It has not been necessary to determine whether the claim for breach of fiduciary duty on which the Plaintiffs rely is a genuine offsetting claim.
[2]
Undisputed background facts
Mr Mohammed Alamin is the sole director of Amin Property Group, Amin Hadiqat, and Amin Murooj. MSAA Family Pty Ltd (as trustee for MSAA Family Trust) (MSAA Family) is the sole shareholder of Amin Property Group, Amin Hadiqat, and Amin Murooj. Mr Alamin is the sole director and sole shareholder of MSAA Family.
Mr Islam and Mr Alamin are co-directors and co-owners (directly, or through their respective family trusts) of MH Affordable Homes Pty Ltd, MH Affordable Homes on Woolgen Park Pty Ltd, MH Affordable Homes on Dickson Pty Ltd, MH Affordable Homes on Kelly Pty Ltd, and MH Affordable Homes on Angle Vale Pty Ltd. It is convenient to refer to these companies collectively as the MH Group. These companies are the vehicles through which Mr Islam and Mr Alamin and/or their respective family trusts have carried out a business of acquiring and subdividing land, developing homes on the subdivided lots, and selling those lots. According to Mr Islam's evidence in these proceedings, most of the lots are the subject of contracts for sale to purchasers even before the subdivided lots have been created. On entering into contracts to purchase lots, purchasers typically pay either the whole of the purchase price, or a large deposit of between 30 and 50 per cent of the purchase price of the lot. Those funds paid by purchasers (referred to by Mr Islam and Mr Alamin as "pre-sales") are released to the relevant MH Group company and used to pay development costs, or for other MH Group business purposes. Purchasers who have paid deposits make regular instalment payments, and completion occurs once they have paid the whole of the price for the subdivided and developed lot. Mr Alamin embraced this aspect of Mr Islam's evidence describing the MH Group business model.
The Plaintiffs are not part of the MH Group.
On 13 December 2021, Mr Islam commenced proceedings in this Court against Mr Alamin, three companies associated with Mr Alamin - Amin Hadiqat (then known as MA Signature Homes Pty Ltd), Amin Homes Hadiqat Pty Ltd, and Amin Murooj (the Amin defendants) - and the MH Group companies. Mr Islam claimed that the affairs of the MH Group companies had been conducted oppressively, and that Mr Alamin had acted in breach of his statutory and fiduciary duties to members of the MH Group. The bases of those claims included that Mr Alamin had allegedly: (1) used the funds and business opportunities of the MH Group companies for his own benefit, and for the benefit of Amin Hadiqat, to acquire land at 11 Woolgen Park in Leppington for Amin Hadiqat (referred to as the Purchase Contract); (2) entered into contracts for the pre-sale of lots in a proposed subdivision of the 11 Woolgen Park property prior to the completion of the Purchase Contract (referred to as the Pre-Sale Contracts); (3) received payment of cash deposits and other pre-payments under those Pre-Sale Contracts (referred to as the Pre-Sale Payments); (4) sought to retain the benefit of the rights under the Purchase Contract, the Pre-Sale Contracts, and the Pre-Sale Payments for himself, rather than holding those benefits for the MH Group companies; and (5) used the Pre-Sale Payments and the rights of Amin Hadiqat under the Purchase Contract to enable Amin Hadiqat and Amin Murooj to acquire further assets including a property at 82 Woolgen Park in Leppington (referred to as the Traceable Assets). The relief sought by Mr Islam was directed to stripping from the Amin defendants the benefits they obtained from Mr Alamin's alleged breaches of statutory and fiduciary duties. The principal relief sought by Mr Islam was a declaration that the purchaser's rights under the Purchase Contract and the Pre-Sale Contracts, the Pre-Sale Payments, and the Traceable Assets, were held on constructive trust for the MH Group companies, or some of them, and orders for the transfer of those assets to the beneficiaries of that constructive trust. That relief was sought by way of relief for alleged oppression under s 233 of the Corporations Act 2001 (Cth) or, alternatively, on behalf of the MH Group companies in the event that the Court granted leave to Mr Islam to bring the proceedings on behalf of those companies pursuant to s 237 of the Corporations Act. Further or in the alternative to the declaration of constructive trust, Mr Islam sought an account, equitable compensation, and damages. It is convenient to refer to these proceedings as the Islam proceedings.
[3]
The parties' contentions and the evidence of Mr Alamin and Mr Islam in the statutory demand proceedings
In the statutory demand proceedings, the Plaintiffs contend that there is a genuine dispute about whether the sum of $3,250,000 is presently due and payable under the Settlement Deed because there is a genuine dispute about whether Mr Alamin and Mr Islam had the mutual or common intention referred to in paragraphs 28(a) and 29(a), and made the mutual mistake referred to in paragraph 29(a) of the statement of claim in the Alamin proceedings, and whether the Settlement Deed should therefore be rectified in the manner pleaded in the Alamin proceedings. [16]
Further, or alternatively, the Plaintiffs contend that there is a genuine dispute about whether the sum of $3,250,000 is presently due and payable under the Settlement Deed because there is a genuine dispute about whether Mr Alamin had the intention referred to in paragraphs 28(a) and 30(a), and made the mistake referred to in paragraph 31(a) of the statement of claim in the Alamin proceedings, to the knowledge of Mr Islam, and whether the Settlement Deed should therefore be rectified in the manner pleaded in the Alamin proceedings. [17]
Further, or alternatively, the Plaintiffs contend that they have a genuine offsetting claim against Mr Islam for alleged breach of fiduciary duty in lodging and failing to remove the registered security interests, allegedly causing Amin Hadiqat to be unable to complete the purchase of the 11 Woolgen Park property, as pleaded and particularised in paragraph 23 of the statement of claim in the Alamin proceedings. As senior counsel for the Plaintiffs clarified during the hearing of the statutory demand proceedings, the contention that the registration of the security interests constituted a breach of fiduciary duties allegedly owed to the Plaintiffs depends on acceptance of the contentions pleaded in paragraphs 18 to 22 of the statement of claim in the Alamin proceedings that the Settlement Deed varied the alleged joint venture, including by treating the 11 Woolgen Park and 82 Woolgen Park properties as joint venture properties and by treating Amin Hadiqat, Amin Murooj and Amin Property Group as parties to the alleged joint venture.
In his affidavit sworn on 7 July 2022 and read in each of the statutory demand proceedings, Mr Alamin has given evidence that: "I dispute that I owe Hamidul the Alleged Debt … and claim that I have an offsetting claim for damages in the amount of at least the amount of the Alleged Debt".
[4]
Applicable principles
As Bell P (as the Chief Justice then was) said in Grandview Ausbuilder Pty Ltd v Budget Demolitions Pty Ltd: [18]
"The establishment of an offsetting claim for the purposes of s 459H does not, of course, constitute a finding that the claim is a good one, or that it has been made out. It represents nothing more than a finding that there is a serious question as to the existence of an offsetting claim or an issue deserving of a hearing as to whether the company has such a claim against the creditor and that a claim is made in good faith and is arguable and not frivolous or vexatious: Scanhill Pty Ltd v Century 21 Australasia Pty Ltd (1993) 47 FCR 451 at 460, 467 per Beazley J (as her Honour then was); In the matter of Oztec Pty Ltd [2012] NSWSC 1234 at [22] per Black J…"
When deciding whether a genuine dispute or genuine offsetting claim exists, the test is whether the dispute or claim is one that is bona fide and truly exists in fact and whether the grounds for alleging the existence of the dispute or claim are real and not spurious, hypothetical, illusory, or misconceived. In short, the court must be satisfied that the dispute or claim raises a serious question to be tried. A dispute or claim is bona fide if it is arguable on the basis of facts asserted with sufficient particularity to enable the court to determine that the dispute or claim is not fanciful. [19]
The question is not whether the evidence adduced on the application to set aside the statutory demand is sufficient to establish the dispute or offsetting claim or its amount, but whether the evidence is sufficient to establish that the dispute or offsetting claim is genuine and, in the case of an offsetting claim, its genuine level. [20] It is sufficient if there be a plausible contention requiring investigation. [21] However, as McLelland CJ in Eq in said in Eyota Pty Ltd v Hanave Pty Ltd: [22]
"This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit 'however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be' not having 'sufficient prima facie plausibility to merit further investigation as to [its] truth' … or 'a patently feeble legal argument or an assertion of facts unsupported by evidence'..."
[5]
Consideration and determination
I have considered all of the parties' written and oral submissions.
In my opinion, the claims in the Alamin proceedings for rectification of clause 4 of the Settlement Deed on the grounds of common mistake raise a plausible contention requiring investigation. The evidence before the Court in these statutory demand proceedings raises plausible contentions that the parties to the Settlement Deed entered into it with the common intention that the Settlement Amount in clause 4 would not be payable if Amin Hadiqat and Amin Murooj did not complete the acquisition of the 11 Woolgen Park and 82 Woolgen Park properties, and that they made a common mistake in entering into the Settlement Deed on the terms of clause 4, which did not make the payment of the Settlement Amount conditional on the completion of those transactions.
As was submitted on behalf of Mr Islam, and as Slattery J observed in the Alamin proceedings, [25] those contentions find no support in the terms of the Settlement Deed itself. There is much to be said for the view that it is improbable that Mr Islam and Mr Alamin entered into the Settlement Deed containing the terms set out in clauses 4 and 5, notwithstanding that they had a common intention that the Amin Parties' obligation to pay the Settlement Amount was conditional upon completion of the acquisition of the 11 Woolgen Park and 82 Woolgen Park properties.
Moreover, as senior counsel for Mr Islam submitted, if clause 4 is rectified in the manner sought by Mr Alamin in the Alamin proceedings, the effect of the Settlement Deed will be that the Amin Parties have received the benefit of the mutual releases in clause 15, and the dismissal of the Islam proceedings with no order as to costs pursuant to clause 16, without having paid any part of the Settlement Amount to Mr Islam, and with no obligation to pay in the event that the Amin Parties do not complete the acquisition of the 11 Woolgen Park and 82 Woolgen Park properties. It is arguable that it is inherently improbable that the parties had a common intention to achieve that outcome.
However, as senior counsel for the Plaintiffs submitted, the effect of the Settlement Deed, if not rectified, is that Mr Islam is entitled to payments from the Amin parties totalling $3,250,000 in settlement of his claims in the Islam proceedings which sought to strip the Amin defendants of the benefits derived from Mr Alamin's alleged breaches of duty in acquiring the 11 Woolgen and 82 Woolgen properties, even if Amin Hadiqat and Amin Murooj fail to complete their acquisition of those properties, and therefore fail to realise those benefits. In my opinion, there is a plausible contention that those circumstances - the nature of the claims for relief in the Islam proceedings that were resolved by the Settlement Deed, the fact that all parties knew when they entered into the Settlement Deed that the Amin parties had not yet completed their acquisition of the 11 Woolgen and 82 Woolgen properties, and the effect of clauses 4, 5, 15, and 16 of the Settlement Deed in the event that those transactions are not completed - support an inference that the parties entered into the Settlement Deed with the common intention alleged in the Alamin proceedings.
[6]
Conclusion and orders
For all of the reasons above, the orders of the Court are as follows:
[7]
Proceeding 2023/217577
1. Order pursuant to s 459H of the Corporations Act 2001 (Cth) that the statutory demand issued by the defendant to the plaintiff dated 15 June 2023 be set aside.
2. Order that the defendant is to pay the plaintiff's costs of the proceedings on the ordinary basis, as agreed or assessed.
[8]
Proceeding 2023/217579
1. Order pursuant to s 459H of the Corporations Act 2001 (Cth) that the statutory demand issued by the defendant to the plaintiff dated 15 June 2023 be set aside.
2. Order that the defendant is to pay the plaintiff's costs of the proceedings on the ordinary basis, as agreed or assessed.
[9]
Proceeding 2023/217580
1. Order pursuant to s 459H of the Corporations Act 2001 (Cth) that the statutory demand issued by the defendant to the plaintiff dated 15 June 2023 be set aside.
2. Order that the defendant is to pay the plaintiff's costs of the proceedings on the ordinary basis, as agreed or assessed.
[10]
Endnotes
Alamin v Islam [2023] NSWSC 701 (Alamin v Islam).
Ibid at [3].
Ibid at [19]-[22].
Ibid at [24].
Ibid at [24].
Ibid at [42]-[43].
Tcpt, 24 May 2023, pp 23(39)-24(18).
Alamin v Islam at [24].
Ibid at [24].
Ibid at [25].
Ibid at [26]-[28].
Ibid at [46]-[47].
Ibid at [52]-[71].
See above at [1].
As set out in Sch 2 to the Competition and Consumer Act 2010 (Cth).
See [66] above.
See [66] above.
(2019) 99 NSWLR 397; (2019) 136 ACSR 563; (2019) 35 BCL 279; [2019] NSWCA 60 (Grandview Ausbuilder) at [8] (White JA and Sackville AJA agreeing).
Grandview Ausbuilder at [61]-[65] (Bell P, White JA and Sackville AJA agreeing) and the authorities there referred to, including In Ozone Manufacturing Pty Ltd v Deputy Commissioner of Taxation (2006) 94 SASR 269; (2006) 198 FLR 329; (2006) 62 ATR 142; [2006] SASC 91 at [46]-[49] (Debelle J, Besanko and Layton JJ agreeing).
Grandview Ausbuilder at [65] (Bell P, White JA and Sackville AJA agreeing), referring to In the matter of Citadel Financial Corporation Pty Ltd [2019] NSWSC 65 (Citadel) at [30] (White J) and Britten-Norman Pty Ltd v Analysis and Technology Australia Pty Ltd (2013) 85 NSWLR 601; (2013) 31 ACLC 13-061; [2013] NSWCA 344 (Britten-Norman) at [48]-[49] (Beazley P, Meagher and Gleeson JJA).
Grandview Ausbuilder at [65] (Bell P, White JA and Sackville AJA agreeing), referring to Citadel at [30] (White J) and Britten-Norman at [70] (Beazley P, Meagher and Gleeson JJA).
(1994) 12 ACSR 785; (1994) 12 ACLC 669 at 12 ACSR 787 (references omitted), referred to with approval in Grandview Ausbuilder at [63] (Bell P, White JA and Sackville AJA agreeing).
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] Aust Contract Reports 90-254; [2007] NSWCA 65 at [281] (Mason P agreeing).
Ibid at [316] (Mason P agreeing).
See [53] above.
See [12] above.
See [7] above.
See [41] above; see also the description of the substance of the rectification claim in Alamin v Islam at [51] (Slattery J), which is extracted at [53] above.
The Islam proceedings were listed for hearing commencing on 4 November 2022, with an estimate of four days.
On 17 November 2022, the solicitors then acting for Mr Alamin and the Amin defendants wrote two letters to Mr Islam's solicitors, the first of which conveyed a without prejudice offer, and the second of which conveyed an alternative, open offer.
The terms of the without prejudice offer were that: (1) Mr Alamin and the Amin defendants would pay the sum of $2,000,000 to Mr Islam in full and final settlement of the Islam proceedings, which would be dismissed; (2) the parties were to enter into a deed of settlement and release; and (3) $250,000 of the settlement sum would be paid within 28 days, with the balance of $1,750,000 to be paid within 12 months. Mr Alamin's solicitors stated that the 12-month period for payment was to allow time for the settlement of the transactions concerning 11 Woolgen Park and 82 Woolgen Park because Mr Alamin "will not be in a position to pay the balance of the Settlement Sum until such time as the properties have settled". Mr Alamin's solicitors stated that, for the avoidance of any doubt, the offer involved Mr Alamin retaining the properties at 11 Woolgen Park and 82 Woolgen Park.
The alternative, open offer was made on terms that Mr Alamin and the Amin defendants would consent to some of the relief sought by Mr Islam in the Islam proceedings, including the declaration that 11 Woolgen Park would be held on constructive trust for the benefit of the MH Group companies.
On 19 November 2022, Mr Islam's solicitors responded by conveying to Mr Alamin's solicitors two alternative without prejudice offers on behalf of Mr Islam.
The terms of Mr Islam's first without prejudice offer to settle the Islam proceedings included that: (1) Mr Alamin would resign as a director of the MH Group entities; (2) Mr Alamin and the Amin defendants would be jointly and severally liable to pay $3,500,000 to Mr Islam in instalments of $1,000,000 payable by 30 November 2022, $1,500,000 payable by 31 March 2023, and $1,000,000 payable by 31 May 2023; (3) the whole of the $3,500,000 settlement sum would become payable in the event of any delay in payment of any of the instalments; and (4) the Amin defendants would refrain from encumbering their interest in the 11 Woolgen Park and 82 Woolgen Park properties and would agree that Mr Islam would be entitled to lodge a caveat on the title to each of those properties after any Amin defendant becomes the registered proprietor of the properties.
The terms of Mr Islam's second without prejudice offer to settle the proceedings included that Mr Alamin and the Amin defendants would consent to certain orders and declarations in the Islam proceedings, including (1) a declaration that the contract for the purchase of 11 Woolgen Park, a put and call option in relation to 82 Woolgen Park, pre-sale contracts in respect of those two properties, and funds in the bank accounts of the Amin defendants were held on trust for one of the companies in the MH Group; (2) an order that Mr Alamin do all things necessary to cause those assets to be transferred to one of the MH Group companies; and (3) an order that Mr Alamin account to that MH Group company for all pre-payments and other amounts received by the Amin defendants in respect of the 11 Woolgen Park and 82 Woolgen Park properties. The second without prejudice offer did not contemplate that Mr Alamin would resign as a director of any of the MH Group companies.
Both of the offers made on behalf of Mr Islam stated that no binding obligation would arise unless and until the parties executed a deed of settlement and release to give effect to the terms of the offer.
Mr Islam, Mr Alamin, Amin Hadiqat (under its former name MA Signature Homes Pty Ltd), Amin Murooj, Amin Homes Mahmiat Logan Pty Ltd, Amin Property Group, and the MH Group companies entered into a Deed of Settlement and Release on 22 November 2022 (the Settlement Deed).
The Settlement Deed used the term "the Amin Companies" to refer to Amin Hadiqat, Amin Murooj, Amin Homes Mahmiat Logan Pty Ltd, and Amin Property Group. The term "Amin Parties" was defined as meaning Mr Alamin and the Amin Companies, and any one, more, or all of them.
Pursuant to clause 4(a) of the Settlement Deed, the Amin Parties jointly and severally agreed to pay Mr Islam the "Settlement Amount" of $3,250,000 in full and final settlement of the disputes the subject of the Islam proceedings. Clause 4(b) required the Settlement Amount to be paid in instalments of $350,000 by 31 December 2022, $1,000,000 by 30 June 2023, and $1,900,000 by 28 February 2024, and provided that time was of the essence in relation to each such payment. Clause 5 relevantly provided that the whole of the Settlement Amount would immediately be due and payable in the event of a failure to pay an instalment in full or on time, if that breach was not remedied within 14 days of written notice being given to the Amin Parties (with time being of the essence).
Pursuant to clause 6 of the Settlement Deed, the Amin Parties agreed that, until the Settlement Amount was paid in full, they would not transfer, dispose of, or encumber or otherwise deal with all or any part of their interest in the 11 Woolgen Park and 82 Woolgen Park properties, other than to sell lots in the proposed sub-divisions of those properties or to obtain finance for the purpose of completing the purchase of the properties under the contract for sale of 11 Woolgen Park and under the put and call option in relation to 82 Woolgen Park.
Pursuant to clause 7 of the Settlement Deed, the Amin Parties charged: (1) their present and any and all future interest in 11 Woolgen Park and 82 Woolgen Park, or any contract in respect of those properties; and (2) their shares in the MH Group companies and the Amin Companies (including their rights to share in the profits of those companies by way of dividends or otherwise), as security for the payment for any amounts payable under the Settlement Deed. Clause 8 provided that the Amin Parties acknowledged and agreed that, from the date on which they became registered as the proprietors of 11 Woolgen Park and 82 Woolgen Park, Mr Islam would be entitled to lodge and maintain a caveat over each of those properties in order to protect his interest as chargee.
Clause 9 of the Settlement Deed provided that, in the event of default by the Amin Parties, Mr Islam may commence proceedings to enforce the Settlement Deed, and the Amin Parties would not be entitled to raise any defence, set off, or cross-claim in respect of any claim by Mr Islam for payment under clause 4 of the Settlement Deed.
Clause 15 of the Settlement Deed provided contained mutual releases in the following terms:
"Islam, the entities in the MH Group, and the entities in the Amin Parties, and each of them, release each other from any and all Claims they have, may have or have had, whether known or unknown, and whensoever and howsoever arising against one another up to the date of this deed, including in relation to any payments made or received by any one or more of them whether by way of loan or otherwise including in relation to the sale of all or any part of 11 Woolgen or 82 Woolgen.
This release shall not operate in respect of loans internal to the MH Group, as between any member of the MH Group and Islam or Alamin, or internal to the Amin Group."
The term "Claim" was defined in the Settlement Deed as meaning:
"All actions, suits, causes of action, proceedings, claims, both at law or at equity and/or arising under any statute, including all claims in relation to, arising out of or in any way connected with the subject matter referred to in the Proceedings."
The reference to the "Proceedings" is a reference to the Islam proceedings.
Clause 16 and Annexure C to the Settlement Deed provided that the parties agreed to finalise the Islam proceedings by the Court making orders dismissing the proceedings with no order as to costs. Clause 16 did not provide for the dismissal of the Islam proceedings to be deferred until after payment of the Settlement Amount, or payment of any instalment of the Settlement Amount.
On 5 December 2022, Mr Islam registered on the Personal Property Securities Register (PPSR):
1. a charge over Mr Alamin's present and any and all future interest in shares in Amin Hadiqat and two MH Group companies - MH Affordable Homes Pty Ltd and MH Affordable Homes on Woolgen Park Pty Ltd - including rights and entitlements under or in respect of those shares such as entitlement to receive or share in the profits by way of dividend, as security for the payments or liabilities under the Settlement Deed (registered security interest 202212050019100);
2. a charge over the present and any and all future interest of the MSAA Family Trust in shares in Amin Property Group and three MH Group companies - MH Affordable Homes on Kelly Pty Ltd, MH Affordable Homes on Dickson Pty Ltd, and MH Affordable Homes on Angle Vale Pty Ltd - including rights and entitlements under or in respect of those shares such as entitlement to receive or share in the profits by way of dividend, as security for the payments or liabilities under the Settlement Deed (registered security interest 202212050018863); and
3. a charge over Amin Property Group's present and any and all future interest in shares in Amin Hadiqat, Amin Murooj, and Amin Mahmiat Logan Pty Ltd, including rights and entitlements under or in respect of those shares such as entitlement to receive or share in the profits by way of dividend, as security for the payments or liabilities under the Settlement Deed (registered security interest 202212050018454).
On 22 December 2022, Mr Islam's solicitors wrote to the solicitors then acting for Mr Alamin, reminding them that the first instalment of $350,000 under the Settlement Deed was due and payable by 31 December 2022.
Mr Alamin's solicitors replied in the following terms on 23 December 2022:
"We refer to the Deed of Settlement executed on 22 November 2022 (the Deed) and to your correspondence of 22 December 2022.
The Deed contemplates that the first instalment of $350,000.00 is due and payable by 31 December 2022. We are instructed that our Client may not be able to meet this timeframe due to events and circumstances beyond our Client's control.
As you are aware, the payment term stipulated in the Deed was predicated on the Completion of the contract for sale for 11 Woolgen Park Road Leppington NSW (the Property) by December 2022. Our Client has previously obtained finance for the purchase of the Property however, due to unforeseen circumstances arising out difficulties in obtaining the required short fall funds, Completion has not yet occurred and is unlikely to occur before February 2023.
In addition to not yet having completed the purchase of the Property, we are instructed that our Client was unable to conduct their ordinary business of selling pre-subdivided lots to prospective purchasers due to the Proceedings. As such, our client was unable to raise funds. Now that our Client is able to resume their ordinary business, they find it difficult to raise the required funds over December and January which are the holidays months and quiet months, which your client is well aware off [sic]. On this basis, our Client seeks your Client's indulgence in extending the time for the payment of the first instalment until 15 February 2023.
We are instructed to reiterate that our Client remains committed to complying with the Deed and to ensuring payment of the Settlement Sum (as defined in the Deed) is paid in full to your Client. Our Client merely seeks a minor adjustment to the timetable for payment of the first instalment.
We are further instructed to note that respectfully, granting our Client an extension of time to pay the first instalment may nevertheless result in your client receiving payment much sooner than if they were to commence proceedings seeking to enforce the Deed given that as it stands, our Client does not own the Property."
Mr Islam's solicitors replied on 28 December 2022, stating:
"Our client requires payment in accordance with the deed."
Mr Islam's solicitors wrote to Mr Alamin's solicitors again on 6 January 2023, noting that payment of the first instalment had not been received and giving 14 days' notice to remedy that default.
On 10 February 2023, Mr Islam's solicitors wrote to Mr Alamin's solicitors noting that the default had not been remedied, and that the full Settlement Amount of $3,250,000 was therefore due and payable pursuant to clause 5 of the Settlement Deed.
By April 2023, Mr Alamin and the Amin defendants had retained the solicitors who have acted for them in these proceedings. Those solicitors wrote to Mr Islam's solicitors on 21 April 2023, stating that:
"a. The Deed of Settlement contemplated that the purchase of the 11 Woolgen Park Road land (Woolgen Road Property Property) by MA Signature Homes Pty Ltd (which has now changed its name to Amin Homes Hadiqat Woolgen Pty Ltd (AHHW)) would enable the development of that land that would, in turn, allow AHHW to generate profits a portion of which are payable, in effect, under the Settlement Deed.
b. To obtain the Woolgen Road Property Property, Mr Islam was aware that AHHW would require finance. To obtain that finance, it would need to provide security. That security would be obtained, and had already been discussed with, Bass Finance.
c. Bass Finance advised that it was not able to provide the finance sought where Mr Islam had encumbered certain shares owned by Mr Alamin and registered them on the PPSR.
d. Mr Islam would have been aware of our client's financing requirements as he is also party to other financing arrangements with Bass Finance as part of our respective clients' previous and ongoing business dealings.
e. Where the Woolgen Road Property cannot be purchased, it will never be possible to generate profit from the development of that land. This undermines the very basis upon which the Deed of Settlement was entered and the remedy your client sought from the Supreme Court in attempting to have the Woolgen Road Property brought back within the structure of the MH Group so that, we assume, your client could obtain the benefit of a portion of the profit generated from that asset."
The letter stated that:
"… Our client fully intends to comply with the Deed of Settlement and specifically the obligation to pay Mr Islam the agreed sum - it simply seeks that the Islam PPSR Charge be removed for the sole purpose of complying with the Deed of Settlement."
The letter requested that Mr Islam execute a deed of release to facilitate the removal of registered security interest 202212050019100, and stated that Mr Islam would "shortly" be able to place a caveat on the 11 Woolgen Park property after Amin Hadiqat completed its purchase of that property, which would protect "a broadly equivalent interest". The letter stated that Mr Alamin would commence proceedings seeking orders for the immediate removal of that security interest if Mr Islam did not execute the deed of release.
The letter referred to remedies that Mr Alamin considered may be available to him in the event that he were forced to commence proceedings seeking removal of registered security interest 202212050019100. Those remedies did not include equitable relief founded on an alleged breach of fiduciary duty said to be owed by Mr Islam to Mr Alamin, or to Amin Hadiqat, Amin Murooj, or Amin Property Group.
Mr Alamin's solicitors then referred to financing arrangements between the MH Group companies and Centuria Bass Financial Services Limited (Centuria Bass). The letter stated that those financing arrangements provided a finance facility in relation to MH Affordable Homes on Kelly Pty Ltd, which was guaranteed by personal guarantees given by each of Mr Islam and Mr Alamin personally and in their capacity as trustees of their respective family trusts. The letter recorded the writer's understanding that, if Centuria Bass were to become aware of registered security interest 202212050019100, it would likely consider this to be a breach of the financing arrangements, and that this would put the funding under those arrangements in jeopardy. The letter referred to certain provisions of the documents comprising the financing arrangements (which were not in evidence in the present proceedings) and set out the writer's analysis of potential consequences of breach of the financing arrangements. The letter continued:
"25. … should the parties be found to be in breach because of your client's refusal to remove the Islam PPSR, your client is failing to act in good faith and in the best interests of MH Affordable Homes on Kelly Pty Ltd, of which your client is a director. Your client ought to be well aware of the duties he owes as a director to MH Affordable Homes on Kelly Pty Ltd as we understand that your client scrutinised and criticised our client's conduct during the proceedings late last year. In particular, your client ought to be aware:
a. of his statutory duty under s 181 of the Corporations Act to exercise his powers in good faith in the best interest of the company; and
b. fiduciary duty not to take an opportunity or advantage for himself at the expense of MH Affordable Homes on Kelly Pty Ltd.
By refusing to remove the Islam PPSR unless your client is paid the entire sum under the Settlement Deed, putting at risk MH Affordable Homes on Kelly Pty Ltd to be in breach of its obligations to Bass Financing would, in our view, constitute a breach of your client's duties."
The letter concluded by reiterating the request that Mr Islam execute the proposed deed of release and remove registered security interest 202212050019100 by Monday, 24 April 2023 at 12:00pm.
On 4 May 2023, Mr Islam's solicitors wrote to Mr Alamin's solicitors referring to the terms of clauses 4 and 5 of the Settlement Deed, rejecting the assertion that payment of the Settlement Amount was dependent on Mr Alamin completing the purchase of 11 Woolgen Park, and stating that Mr Islam was entitled under the Settlement Deed to register and maintain the registration the security interests that he had registered on the PPSR on 5 December 2022.
On 12 May 2023, Mr Alamin commenced proceedings in this Court against Mr Islam and the other parties to the Settlement Deed, including Amin Hadiqat, Amin Murooj, Amin Property Group, and the MH Group companies that were parties to the Settlement Deed. The summons filed by Mr Alamin sought rectification of the Settlement Deed or, alternatively, a declaration that the Settlement Deed is void ab initio by reason of mistake. By way of interim relief, the Summons sought an order that the PPSR security interest registered by Mr Islam on 5 December 2022 be removed within 24 hours, and an order restraining the defendants from registering any further charge (the Alamin proceedings).
In his affidavit affirmed on 11 May 2023 in support of the claims for relief in the summons, Mr Alamin deposed that:
"44 I had always understood that any payment under the Deed was to be on the basis that I had purchased the Leppington Property as the Court Proceedings were seeking to obtain the profit from the Leppington Property.
45 If I cannot purchase the Leppington Property, there will be no profit from the development.
46 If I cannot purchase the Leppington Property, I will not have the funds available to make payment pursuant to the Deed and I do not believe I will be able to obtain any other financing whilst a PPSR charge is in place."
The reference to the "Court Proceedings" is a reference to the Islam proceedings. I assume that the "Leppington Property" refers to 11 Woolgen Park (either alone, or together with 82 Woolgen Park).
In a further affidavit affirmed on 22 May 2023 in the Alamin proceedings, Mr Alamin deposed that:
"24 … I believe Mr Islam is aware that I would not be in a position to obtain funds in relation to the Deed until the Leppington Properties were purchased and had always understood the Deed settlement amount to be the anticipated 50% profit from the development of the Leppington Properties which Mr Islam's Court Proceedings sought to have brought back into the MH Group.
…
27 I accept that Mr Islam needs the money under the Deed, but I cannot pay it to him until he removes the PPSR charge and I purchase the Leppington Properties. It is not money that I am personally withholding - that money is future profits to be generated by various companies, and which I do not hold. At present, I would have to take out a loan to pay it to him. I therefore deny that I have been acting to deprive him of funds which I currently have.
…
35 Whilst I am unhappy about the outcome and preparation of the Deed, I am committed to paying Mr Islam the funds under the Deed and have no intention of making it difficult for Mr Islam to recover those funds. I simply wish to pay Mr Islam, finalise our business dealings, and move on from oner [sic] another. I have always maintained that to be able to pay Mr Islam the perceived profit of the Leppington Purchase, the subject of the Court Proceedings, I need to first acquire that property. Further, Mr Islam is a joint signature on all MH Group bank accounts. If any distribution was to be made to shareholders, Mr Islam would be aware of those distributions and could take steps to have those funds paid to him if required. However, I am not simply able to pay him the funds in those company accounts as I believe it would be a breach of my directors' duties. While I accept that a distribution could be made, that distribution would strip the companies of the funds they need to continue the developments which, again, I do not think would be permissible. I would then need to obtain finance to make up that shortfall, which I believe would result in Centuria Bass again requesting that I have the PPSR charges removed."
The reference to "Centuria Bass" is a reference to Centuria Bass Financing, which had made loans to some of the companies in the MH Group, and which had registered charges over some of the same assets in respect of which Mr Islam had registered charges on 5 December 2022. The charges registered by Centuria Bass had been registered earlier and were higher ranking in priority than the charges registered by Mr Islam.
Mr Alamin's application for interim relief in the Alamin proceedings was heard on 24 May 2023 before Slattery J. Ms Elizabeth of counsel appeared for Mr Alamin and Mr Elliott of senior counsel with Ms Dewan of junior counsel appeared for Mr Islam. His Honour dismissed the application with costs, and published reasons for that decision on 21 June 2023. [1]
Slattery J noted that Mr Alamin's claim for orders for the removal of the PPSR-registered charges strongly resembled a claim for final relief. [2] His Honour recorded the details of the charges, and referred to evidence of correspondence of Mr Alamin's solicitors suggesting that those charges they were hindering Mr Alamin in completing his purchase of the Woolgen Park property: [3]
"19 In more detail these PPSR registered charges constituting Mr Islam's charges, were as follows. PPSR 9100 recorded a security interest in Mr Alamin's shares in MH Affordable Homes on Woolgen and MA Signature. The next PPSR 8863 recorded a security interest in shares owned by the trustee of the MSAA Family Trust, Mr Alamin's family trust. This charge includes the following entities: MH Property Group, MH Affordable Homes on Kelly, MH Affordable Homes on Dixon, and MH Affordable Homes on Angle Vale. The last of Mr Islam charges (PPSR 8454) recorded a security interest over assets owned by Mr Alamin's company, Amin Property Group, which charged its interest in a range of its subsidiary entities.
20 Mr Islam's clause 7(b) charges are over valuable assets, notwithstanding Mr Alamin's submission to the contrary. A few examples will suffice. MH Affordable Homes owns properties with expected sales values of $4.37 million and $12.5 million, which are likely to achieve a very substantial surplus after paying out sales and financing costs. MH Kelly expects revenue from unsold lots of $16-$17 million. MH Angle Vale has sold most of its lots and has surplus cash of $1.5 million, with other unsold lots, potentially generating another $500,000. MH Angle Vale has liabilities of less than $500,000.
21 Mr Alamin now seeks to raise finance from Centuria Bass Financial Services Ltd (Centuria Bass) so that MA Signature can complete the acquisition of 11 Wolgan. Mr Alamin's correspondence asserts that he wishes to complete the acquisition of 11 Woolgen so MA Signature can generate profits to make payments under the settlement deed. But an obstacle to this objective has appeared. Centuria Bass will not advance further funds under a proposed facility agreement to MA Signature, unless Mr Islam's charges are removed and given a second ranking after Centuria Bass.
22 The correspondence from the legal representatives of Centuria Bass in April 2023 makes clear that Centuria Bass is requiring PPSR 9100 to 'be removed as the final condition for the finance to be advanced and purchase settled'. The solicitors for Centuria Bass note that Mr Islam's charge was granted in respect of shares held by Mr Alamin in the entity borrowing money, MA Signature. Centuria Bass requires the removal of the charge. The draft facility agreement in which Centuria Bass proposes terms for the advance to Mr Alamin's family trust only seeks security over MA Signature and no other assets."
Slattery J then referred to the contention advanced by Mr Alamin in the Alamin proceedings that the charge that clause 7 of the Settlement Deed permitted Mr Islam to register breached one of the conditions of an existing finance facility between Centuria Bass and one of the MH Group companies referred to as MH Kelly. [4] Mr Alamin contended that the breach may provide a basis for Centuria Bass to call up all monies owing under all finance facilities between Centuria Bass and all MH Group companies. As summarised by Slattery J, it had been submitted on behalf of Mr Alamin at the hearing of the interim relief application that "Mr Alamin and Mr Islam must have overlooked such breaches and such consequences when making the settlement deed." [5]
Slattery J's reasons for judgment extract the written submissions on behalf of Mr Alamin, which made it clear that the common mistake propounded as the basis of the claim for rectification of the Settlement Deed was that Mr Alamin and Mr Islam had believed or assumed that the registration of the charges provided for in clause 7 of the Settlement Deed was permissible under the existing financing arrangements with Centuria Bass: [6]
"42 After stating the principles applicable to the remedy of rectification Mr Alamin puts the following submissions about the availability of the remedy.
'The common mistake is that the PPSR charge was permissible under the parties other financing arrangements. That was not the case, as has become apparent to the Applicant since the Deed was entered into. It is unconscientious for the First Respondent to insist upon the taking and registering of a charge which would place both parties in breach of the Financing Agreements. This is even more so when it appears that, despite having no value, proper basis and being in breach of the Finance Agreements, the charge is maintained. An inference that may be drawn is that this is so to obtain leverage. Where the charge was obtained because of mutual mistake, it is unfair for the First Respondent to now rely on that mistake for his benefit.'
43 Mr Alamin's submissions provide the following submissions as to the necessary proof of a common intention:
'In the present case, the Plaintiff is able to meet the threshold of "clear and convincing proof" of a common intention:
First, both the Plaintiff and Defendant were signatories to the Finance Agreements, as were companies of which they were each solely or jointly the controlling mind. They were also guarantors under those loans in their own capacity and in their capacity as trustees for their respective family trusts;
Second, the Finance Agreements existed at the time the Deed was entered into;
Third, the Finance Agreements expressly prohibited the granting of any security over the assets of Plaintiff and Defendant, which would amount to a breach event; and
Fourth, had the clauses in the Finance Agreements outlined above at paragraphs 22 - 27 above been brought to the attention of the drafters of the Deed, including the Plaintiff and First Defendant, it is difficult to comprehend that Clause 7 would have been agreed to given the clear inconsistency.'"
A submission to similar effect was also made orally during the hearing of the application for interim relief before his Honour, as recorded in the transcript: [7]
"HIS HONOUR: … you have to prove a common intention … That is rectification 101.
ELIZABETH: Your Honour, I accept that. The basis in which we seek rectification is that entry into the clause 7 charge was impossible under the financing agreements, and so, we actually put the rectification point on the impossibility under the financing arrangement, then in place in relation to MH Kelly.
HIS HONOUR: … You say both sides knew it was impossible under the financing agreement. Is that the case?
ELIZABETH: Yes, your Honour. Your Honour, I don't say that they knew. The common mistake is that they hadn't turned their minds. So, those negotiating the deed hadn't turned their minds to those financing agreements which made it impossible, but both Mr Islam and Mr Alamin knew that those financing agreements for MH Kelly to remain in place, because they were both personal guarantors as well in their capacity as trustees, and on that basis, we seek to make out the common intention being that they would never have entered into a deed which was impossible and those financing arrangements, and would be illegal under them.
Because if you look at the terms of those financing arrangements, it makes plain that no charges can be placed upon any of their assets at all. There are no competition clauses, and we say that those clauses make plain that clause 7 is not permissible."
Slattery J considered that the question whether the charges registered pursuant to clause 7 of the Settlement Deed had breached the existing Centuria Bass facilities was "open to argument on both sides". [8] For the purpose of determining the interim relief application, his Honour assumed in favour of Mr Alamin that there had been a breach of those facilities. [9] However, his Honour observed that the evidence suggested that Centuria Bass had ample security for the existing facilities, and that there was no evidence that it was inclined to call in the existing debts. His Honour noted that the parties to the Settlement Deed might have anticipated that relaxed attitude on the part of Centuria Bass given its ample security position. [10]
Slattery J referred to Mr Alamin's evidence - which was expressed a high level of generality - that Mr Islam's registered charge was an obstacle to him obtaining funding from Centuria Bass and that he (Mr Alamin) could not obtain funding elsewhere. His Honour was not prepared to accept those general statements in fact of evidence that Mr Alamin owned interests in a substantial suite of valuable assets, and in circumstances where Mr Alamin had not adduced detailed evidence of his financial position. Nor had he adduced evidence identifying the alternative sources of finances that he had pursued, and explaining why those alternative sources were not available to him notwithstanding his substantial assets. [11]
For the purposes of determining Mr Alamin's application for interim relief, Slattery J assumed in his favour that there was a serious question to be tried. However, his Honour noted "several obvious weaknesses in Mr Alamin's rectification case which weigh against him on the balance of convenience". [12] His Honour stated:
"48 The settlement deed on its face shows that Mr Alamin intended to grant, and Mr Islam intended to receive, the charges that were identified in the settlement deed. There is little evidence of any parallel communications antecedent to the deed from which a common understanding contrary to the settlement deed could be inferred. The normal groundwork for a rectification case seems to be absent.
49 Mr Alamin contends that a common mistake can be implied because granting the charges under the settlement deed was a breach of the loan facility agreement with Centuria Bass, which had advanced monies to MH Kelly to purchase other property. Therefore, it is said that the parties must have entered the settlement deed based on a common mistake.
50 But this case faces several intractable problems. Mr Alamin's case does not account for the distinct possibility that it was open to Centuria Bass not to oppose the creation and registration of Mr Islam's charges, which rank behind Centuria Bass where Centuria Bass already has its own charges. And indeed this is what happened, because Centuria Bass was aware of and was not demanding the removal of Mr Islam's charges notwithstanding the terms of the MH Kelly and other facility agreements.
51 Another of Mr Alamin's contentions in his common mistake case is that the parties to the settlement deed understood and intended that the settlement amount of $3.25 million would be paid from the sales of 11 Woolgen. Nothing in the settlement deed supports this contention. The settlement deed does not make any connection between the payment of the settlement amount and sales of 11 Woolgen. Moreover, the settlement deed was signed on 22 November 2022 and the first payment under it was due on 31 December 2022. At the time the settlement deed was executed 11 Woolgen was undeveloped land still being acquired by Mr Alamin's corporate vehicle. Neither party could have anticipated11 Woolgen sales would be the source of funding for the settlement amount under the settlement deed."
Slattery J held that consideration of the balance of convenient "comfortably permits" the dismissal of Mr Alamin's claim for interim relief. The matters referred to by his Honour included (1) Mr Alamin's failure to provide compelling evidence that he has no sources of income to meet his obligations under the Settlement Deed save for the income that he anticipates generating if and when he settles the purchase of 11 Woolgen Park; and (2) his Honour's assessment of Mr Alamin's claim for final relief as "not compelling" for the reasons that his Honour had identified at [48]-[51] of his reasons for judgment. [13]
As I mentioned at the outset of these reasons, Mr Islam issued a statutory demand to each of Amin Property Group, Amin Hadiqat, and Amin Murooj on 16 June 2023 demanding payment of the sum of $3,250,000 under the Settlement Deed. [14]
On 7 July 2023, the present proceedings were commenced by each of Amin Property Group, Amin Hadiqat, and Amin Murooj claiming orders setting aside the statutory demand on the grounds that there is a genuine dispute about whether the debt is presently due and payable, and that each of the plaintiff's has a genuine offsetting claim. It is convenient to refer to these three proceedings as the statutory demand proceedings, to distinguish them from the Islam proceedings and the Alamin proceedings.
On the same day as Amin Property Group, Amin Hadiqat, and Amin Murooj commenced the statutory demand proceedings, Mr Alamin filed a statement of claim in the Alamin proceedings. The statement of claim names Mr Alamin and as the first plaintiff and MSAA Family Pty Ltd as the second plaintiff. The named defendants are the same as set out in the summons filed on 12 May 2023. Mr Islam is the first defendant, Amin Hadiqat is the second defendant, Amin Murooj is the third defendant, MH Group companies are the third to eighth defendants, and Amin Property Group is the ninth defendant.
The statement of claim in the Alamin proceedings pleads that:
1. the property development business that I have described above is a joint venture that Mr Alamin and Mr Islam entered into in about 2015 on the basis of a relationship of mutual trust and confidence (defined as the "Joint Venture");
2. by reason of their mutual trust and confidence, each of Mr Alamin and Mr Islam "in respect of themselves and/or entities they controlled, owed fiduciary duties to the other in respect of the Joint Venture", including a duty "not to use any position, right or power to cause damage or harm to the other in relation to the Joint Venture between them" (defined as the "Fiduciary Duties");
3. for the purpose of implementing the joint venture, Mr Alamin and Mr Islam agreed (a) to establish individual companies to acquire land and undertake each specific development in which they or, entities owned by them, would be the shareholders (defined as the "JV Companies" and the "JV Properties"); (b) to fund the purchase of properties and the operation of the joint venture from their own funds, or from funds lent by one joint venture company to the other; (c) to be involved in the running of the business of the joint venture; and (d) to share any profits in proportion to their contributions to each development project, or as otherwise agreed between them (defined as the "Joint Venture Agreement");
4. the Joint Venture Agreement included implied duties owed by Mr Alamin and Mr Islam "by themselves and their associated entities" (a) to act in good faith, reasonably and for a proper purpose in respect of each other and/or the subject matter of the Joint Venture; and (b) to cooperate and give each other the benefit of the Joint Venture (defined as the "JV Contractual Duties");
5. the relationship of mutual trust and confidence between Mr Alamin and Mr Islam had broken down from at least mid-2020;
6. prior to mid-2020, the JV Companies had acquired and developed, or were in the process of developing, the JV Properties at 4 Harris Street, Angle Vale, 404 Fourth Avenue, Austral, 105-110 Gurner Avenue, Austral, 39 Dickson Road, Leppington, and 95 Boyd Street, Austral;
7. on and after 6 March 2021, Mr Alamin - believing that he was entitled to do so - had caused Amin Hadiqat to enter into a contract to purchase the property at 11 Woolgen Park Road, Leppington, to pay a 10 per cent deposit under that contract followed by an additional $820,000 towards the purchase price payable under that contract, and to enter into a loan agreement with Centuria Bass for $4,014,000; and
8. on and after 12 November 2021, Mr Alamin - believing that he was entitled to do so - had caused Amin Murooj to enter into a put and call option for the purchase of the property at 82 Woolgen Park Road, Leppington, and to pay a call option fee of $1,500,000 to the counter-party in instalments over a period of 18 months.
The statement of claim then pleads that Mr Islam commenced the Islam proceedings on 23 December 2021 seeking relief that included a declaration that the rights of Amin Hadiqat in the 11 Woolgen Park property were held on trust for the MH Group and, alternatively, an account of profits or payment of equitable compensation to the MH Group. It is pleaded that:
"The effect of the relief sought by Islam in the Islam Proceedings was to have the 11 Woolgen Property and the 82 Woolgen Property, treated as if they were JV Properties, notwithstanding those properties had not been purchased by a JV Company."
After referring to the Settlement Deed entered into by Mr Alamin, Mr Islam, and others on 22 November 2022, Mr Alamin pleads that:
"20 The Deed of Settlement had the effect of varying the terms of the Joint Venture and/or Joint Venture Agreement as follows (Varied Joint Venture):
a. Alamin and Islam and their respective associated entities agreed to terminate the Joint Venture in respect of any future properties that either of them or their associated entities wished to acquire, subdivide and/or sell adopting a business model similar to that used by the Joint Venture or the JV Companies;
b. Alamin and Islam otherwise agreed to continue the Joint Venture in respect of existing JV Properties referred to in paragraph 14 above only;
c. Alamin and Islam agreed to treat the 11 Woolgen Property and the 82 Woolgen Property as if they were JV Properties, subject to the terms of the Deed of Settlement, and to only release those properties from the Varied Joint Venture upon payment to Islam of an amount described in the Deed of Settlement as the 'Settlement Amount'."
The reference to the "existing JV Properties" in paragraph 22(b) of the statement of claim is a reference to the properties referred to at 58 above.
In relation to paragraph 20(c) of the statement of claim, the particulars state that:
"… this arises by necessary implication from clause 6 of the Deed of Settlement in the context of (i) the pre-existing Joint Venture, and (ii) the claims for relief sought in the Islam SOC, the effect of which was to treat the 11 Woolgen Property and the 82 Woolgen Property as if they were JV Properties, until such time as the 'Settlement Amount' was paid."
Mr Alamin then pleads that:
"21 By reason of paragraphs 8-12 and 20 above, each of the Fiduciary Duties and/or JV Contractual Duties continued to be owed by Islam in respect of the Varied Joint Venture, the JV Properties, and also in respect of the 11 Woolgen Property and the 82 Woolgen Property, until such time as the 'Settlement Amount' described in the Deed of Settlement was paid.
22 Further or alternatively, Islam owed Alamin and each of the second to ninth defendants implied contractual duties under the Deed of Settlement (Deed Implied Duties) including:
a. A duty to act in good faith, reasonably and for a proper purpose in respect of each other and/or the subject matter of the Deed;
b. A duty to cooperate and to give Alamin and each of the defendants the benefit of the Deed."
The statement of claim then pleads that:
"23 Following the entry into the Settlement Deed and/or the Varied Joint Venture, Islam has failed to comply with his Fiduciary Duties and/or his JV Contractual Duties and/or his Deed Implied Duties (Islam's Wrongful Conduct), including by reason of the following conduct:
a. Islam continues not to undertake any, or any meaningful, work to contribute to the profitable development of the JV Properties referred to in paragraph 14 above, but continues to leave that work to Alamin …
b. Islam has refused or delayed authorising payments to third party contractors and/or suppliers from the bank accounts of the JV Companies, thereby exposing Alamin and the JV Companies to liability …
c. Islam refused to agree to a distribution of at least $1,100,000 and 2 (then) unsold lots in developments of the eighth defendant, on or before 30 June 2023, to each of Alamin and Islam according to their agreed entitlement of 50% of those proceeds …
d. Islam has wrongfully generated disputes with Alamin in order to extract a payment of the 'Settlement Amount' of $3,250,000 under the Deed of Settlement from Alamin, and in doing so, caused or contributed to the loss of the opportunity to acquire the 11 Woolgen Property under the 11 Woolgen Purchase Agreement, and thereafter put at risk the future purchase of the 82 Woolgen Property under the 82 Woolgen Option Agreement by [Amin Hadiqat and Amin Murooj] respectively;
PARTICULARS
i. Islam well knew and understood that the 'Settlement Amount' under the Deed of Settlement was determined and agreed as a half share of the profit expected to be made by [Amin Hadiqat and Amin Murooj] from the acquisition, development and sale of the 11 Woolgen Property and 82 Woolgen Property, as if those properties were JV Properties, as stated in paragraph 20c. above.
ii. Islam lodged or caused to be lodged Personal Property Securities Register (PPSR) numbers:
A. 202212050019100 over Alamin's present and any and all future interest in shares in [Amin Hadiqat] and [MH Affordable Homes on Woolgen Park Pty Ltd], including rights and entitlements under or in respect of those shares;
B. 202212050018863 over [MSAA Family Pty Ltd]'s present and any and all future interest in shares in [MH Affordable Homes on Kelly Pty Ltd], [MH Affordable Homes on Angle Vale Pty Ltd] and [Amin Property Group], including rights and entitlements under or in respect of those shares; and
C. 202212050018454 over [Amin Property Group]'s present and any and all future interest in shares in [Amin Hadiqat] and [Amin Murooj], including rights and entitlements under or in respect of those shares,
which resulted in [Amin Hadiqat] being unable to complete its contract to purchase 11 Woolgen, and as a further consequence of which the vendor has now advised that the property has been sold to a new purchaser. The loss of 11 Woolgen has the potential to adversely affect the ability of [Amin Murooj] to finance the purchase of the property at 82 Woolgen. Islam was told repeatedly that this was the likely consequence of his refusal to remove the charge.
iii. Islam opposed interlocutory relief being granted by Slattery J in respect of the removal of the PPSR registrations referred to in ii. above, on the basis that Alamin had not made the payments under the Woolgen Deed, even though the removal of those PPSR registrations would have enabled [Amin Hadiqat] to acquire the 11 Woolgen property and thereafter make those payments. In response to a questions from Slattery J, counsel for Islam plainly stated that Islam's intention was to get paid his 'price' for temporarily uplifting the PPSR registrations to allow Centuria Bass to register its charge (T55.25-.28). Alamin has filed a Notice of Intention to seek leave to appeal against that judgment.
e. on 16 June 2023, Islam served, and has refused to withdraw, Statutory Notices of Demand (Statutory Demands) issued upon [Amin Hadiqat], [Amin Murooj] and [Amin Property Group] for $3,250,000 allegedly owing under the Deed of Settlement, for the purpose of extracting unwarranted financial benefits for himself at the expense of his co-venturer, Alamin, the JV Properties and the development of 11 Woolgen and 82 Woolgen, well knowing that the funds intended to be used to pay that sum under the Settlement Deed were unavailable, because [Amin Hadiqat] could not complete the 11 Woolgen Purchase Agreement for the reasons outline above in subparagraph d above and/or because the assets of Alamin and his associated entities were tied up in the JV Properties.
PARTICULARS
i. Statutory Demands of $3,250,000 issued by Hamidul Islam to Amin Property Group Pty Ltd, Amin Homes Hadiqat Woolgen Pty Ltd, Amin Homes Murooj Pty Ltd and served on 16 June 2023.
ii. Letter from McCabes of 29 June refusing to withdraw the Statutory Demands.
iii. Both Islam, by himself and his agent Foezullah Dewan of McCabes (Dewan), Islam's solicitor, knew that the 11 Woolgen Purchase Agreement had not been completed by reason of Islam's conduct set out in subparagraph d. above. Mr Dewan also knew of the assets, structure and operations of the Joint Venture and of Alamin, as he had previously acted for and advised Alamin and the Joint Venture before acting solely in the interests of Islam.
24 By reason of the Islam's Wrongful Conduct, the Varied Joint Venture and/or Alamin by himself and/or his related entities:
a. have suffered or will suffer loss and damage, for which he is entitled to damages and/or equitable compensation;
b. is entitled to orders restraining Islam, by himself and/or his associated entities, from:
i. seeking payment under clause 4 of the Woolgen Deed [sic - Deed of Settlement] other than from profits earned from the acquisition and development of the 11 Woolgen Property and the 82 Woolgen Property;
ii. seeking to rely upon or otherwise enforce the Statutory Demands;
iii. otherwise hindering or delaying the making of payments in the ordinary course of business of the Varied Joint Venture;
iv. seeking to impose conditions on the giving of his consent to the making of distributions to shareholders by the JV Companies otherwise recommended by the accountant to the Varied Joint Venture, either at all or to obtain an unwarranted collateral benefit for himself."
The statement of claim then pleads a claim for winding up of each of the JV Companies on the just an equitable ground under s 461(1)(k) of the Corporations Act.
The statement of claim then pleads the following claim for rectification of the Settlement Deed:
"28 By reason of paragraphs 20 and 21 above, it was the mutual and/or common intention of Alamin and Islam, as proponents of the Deed of Settlement, and of their associated entities, that:
a. the 'Settlement Amount in clause 4 of the Deed be payable from the profit expected to be made by the second and third defendants from the acquisition, development and sale of the 11 Woolgen Property and the 82 Woolgen Property respectively;
b. that the Deed of Settlement and the terms thereof would not conflict with any contractual duties owed by any of the parties to the Deed to any third-party financier to the Joint Venture or the Varied Joint Venture and/or any JV Companies, including Centuria Bass.
PARTICULARS
i. The mutual intention of the parties was partly express and partly implied.
ii. The express part was in a letter from Cordoba Legal to McCabes on 17 November 2023 advising that 'The Offer incorporates a[] 12 months payment term to allow the Properties to settle. Our Client will not be in a position to pay the balance of the Settlement Sum until such time the Properties have settled' which letter preceded the entry into the Deed of Settlement.
iii. The implied part was derived from the nature and terms of the claim made by Islam in the Islam Proceedings, and the decision by Islam and Alamin to continue the Joint Venture subject to the variations set out in paragraphs 20 and 21 above. It is also derived from the offers made by McCabes prior to entry into the Deed where, variously, efforts were made to either transfer the legal entitlement to of benefit of 11 Woolgen and 82 Woolgen to MH Woolgen. It is also to be implied from the terms of the financing agreements entered with Centuria Bass in relation to the Joint Venture Properties including the prohibiting of competing security interests over the secured assets secured without consent.
29 By reason of the mutual and/or common intention of the parties set out in paragraph 28 above, the parties to the Deed of Settlement entered into the Deed on the basis of a mutual mistake about the terms of the Deed of Settlement, in that:
a. clause 4 did not make the payment of the 'Settlement Amount' conditional upon the acquisition of the 11 Woolgen Property and the 82 Woolgen Property, pursuant to the 11 Woolgen Purchase Agreement and the 82 Woolgen Option Agreement respectively, but assumed implicitly that such acquisitions would occur;
b. clause 6 [sic - clause 7] did not make the granting of the charge by Alamin and his associated entities conditional upon the granting of the charge in clause 6 [sic - clause 7] not conflicting with any contractual duties owed by any of the parties to the Deed to any third party financier to the Joint Venture or the Varied Joint Venture and/or any JV Companies, including Centuria Bass, but assumed implicitly and incorrectly that Alamin and his associated entities were not subject to contractual restrictions in relation to the granting of the charge in clause 6 [sic - clause 7].
PARTICULARS
i. As to b., see eg. Clause 8.4 of the Deed of Guarantee and Indemnity for the 95 Boyd Street property in favour of Centuria Bass that provided for 'no competition' to secured assets.
30 Further or alternatively to paragraphs 28 and 29 above:
a. the intention described in paragraphs 28(a) and (b) above was an intention held by Alamin and his associated entities to the knowledge of Islam;
b. the mistake referred to in paragraph 28(a) and (b) above were unilateral mistakes made by Alamin that Islam knew had been made by Alamin, and which Islam failed to correct.
PARTICULARS
i. The knowledge of Islam may be inferred from the matters referred to in the particulars to paragraph 29 above [sic - this is presumably intended to refer to the particulars to paragraph 27 above].
ii. The knowledge of Islam also includes the knowledge of his solicitor, Mr Dewan of McCabes, as to which see the particulars to paragraph 23(e) above, and who was principally involved in the drafting of the Deed of Settlement on behalf of Islam.
31 By reason of paragraphs 28 and 29, or alternatively 30 above, the Deed of Settlement ought to be rectified to give effect to the mutual and/or common intention stated in paragraph 28, and/or to prevent Islam from taking unconscionable advantage of the unilateral mistakes of Alamin stated in paragraph 30 above, as follows:
a. by making provision for the payment of the 'Settlement Amount' in clause 4 to be conditional upon the acquisition by [Amin Hadiqat and Amin Murooj] of the 11 Woolgen Property and the 82 Woolgen Property respectively, on the terms stated in prayer 6(i) in this Statement of Claim or on such other terms as to this Honourable Court seem just;
b. by including a proviso to ensure that the agreement to grant a charge in clause 6 [sic - clause 7] was not contrary to any finance or other agreements relating to the Joint Venture and/or Varied Joint Venture, or a JV Company, on the terms stated in prayer 6(ii) in this Statement of Claim or on such other terms as to this Honourable Court seem just."
The terms that Mr Alamin seeks to have inserted in clause 4 of the Settlement Deed by way of rectification, as set out in prayer 6(i) of the claims for relief in the statement of claim, are as follows (with the proposed insertions denoted by underlining):
"(a) The Amin parties jointly and severally agree to pay to Islam (two-fifth (2/5) to be paid in his personal capacity and three-fifth (3/5) to be paid in his capacity as trustee of the Islam Trust) the Settlement Amount in full and final settlement of the disputes the subject of the Proceedings.
(b) The Settlement Amount is to be payable by way of the following instalments (Instalments), as to (i) and (ii) upon Amin Homes Hadiqat Pty Ltd becoming the registered proprietor of 11 Woolgen Park Road, Leppington on or before 15 December 2022, and as to (iii) upon Amin Homes Murooj Woolgen Pty Ltd becoming the registered proprietor of and 82 Woolgen Park Road, Leppington by 25 September 2023:
i. $350,000 by 31 December 2022;
ii. $1,000,000 by 30 June 2023; and
iii. $1,900,000 by 28 February 2024,
with time being of the essence in respect of each payment,
provided that, if Amin Homes Hadiqat Pty Ltd and Amin Homes Murooj Woolgen Pty Ltd become the registered proprietors of those properties after 15 December 2022 and 25 September 2023 respectively, the dates specified in (i), (ii) and (iii) are to be extended by a commensurate period of time from the dates of acquisition of those properties."
The terms that Mr Alamin seeks to have inserted in clause 7 of the Settlement Deed by way of rectification, as set out in prayer 6(ii) of the claims for relief in the statement of claim, are as follows (with the proposed insertions denoted by underlining):
"The Amin Parties charge their present and any and all future interest in:
(a) all or any part of 11 Woolgen and 82 Woolgen, or any contract in respect thereof; and
(b) shares held in any MH Group or Amin Companies (which for the avoidance of doubt includes rights and entitlements under or in respect of those shares such as any entitlement to receive or share in the profits by way of dividend or otherwise),
as security for the payments of any amount payable under this Deed for the benefit of Islam and will execute all documents necessary to register or record such charge, provided that no charge is granted which would be contrary to any finance or other agreement with a third party financier in relation to the assets described in (a) or (b) of this clause."
Finally, the statement of claim then pleads that Mr Islam engaged in misleading or deceptive conduct, and that Mr Alamin had relied on that conduct in entering into the Settlement Deed on the alleged mistaken understanding pleaded in paragraphs 29(a) and (b) of the statement of claim. Mr Alamin claims to have suffered loss as a result of the misleading or deceptive conduct, and claims damages or orders under s 236 of the Australian Consumer Law. [15]
As required by r 14.23 of the Uniform Civil Procedure Rules 2005 (NSW), the statement of claim filed in the Alamin proceedings is accompanied by an affidavit of Mr Alamin that he believes that the allegations of fact in the statement of claim are true.
Mr Islam filed a defence to the statement of claim in the Alamin proceedings on 18 August 2023. In that defence, Mr Islam denies the characterisation of his business relationship with Mr Alamin as a joint venture, although he admits that he intended their relationship to be one of mutual trust and confidence. Mr Islam denies that the relationship of mutual trust and confidence had broken down by mid-2020, but admits that Mr Alamin has behaved in a way that is inconsistent with the existence of any relationship of trust and confidence.
Mr Islam admits that Mr Alamin caused Amin Hadiqat to enter into the contract to purchase the 11 Woolgen Park property, and that Mr Alamin caused Amin Murooj to enter into the option in respect of the 82 Woolgen Park property. Mr Islam denies that Mr Alamin had any reason to believe that he was entitled to do so.
Mr Islam denies that the effect of the relief that he had sought in the Islam proceedings was to treat those properties as if they were joint venture properties. Mr Islam relies on the terms of the Settlement Deed - which he says are clear and unambiguous - and says that the payment obligations under the Settlement Deed were not contingent or conditional upon Amin Hadiqat becoming the registered proprietor of the 11 Woolgen Park property and/or Amin Murooj becoming the registered proprietor of the 82 Woolgen Park property. Mr Islam denies that the Settlement Deed had the effect of treating those properties as if they were part of the MH Group and/or part of any joint venture between Mr Islam and Mr Alamin. Mr Islam also denies that the Settlement Deed had the effect of varying the alleged joint venture as pleaded in paragraph 20 of the statement of claim. Mr Islam denies the allegations in paragraph 21 of the statement of claim that Mr Islam owed fiduciary or contractual duties in respect of the alleged "Varied Joint Venture", and in respect of the 11 Woolgen Park and 82 Woolgen Park properties, until such time as the Settlement Amount was paid. Mr Islam also denies that he owed Mr Alamin and each other party to the Alamin proceedings a duty to act in good faith, reasonably and for a proper purpose in respect of each other and in respect of the subject matter of the Settlement Deed, and a duty to cooperate to give Mr Alamin and each defendant to the Alamin proceedings the benefit of the Settlement Deed.
Mr Islam's response to paragraph 23 of the statement of claim includes, relevantly a denial of paragraphs 23(d) and 23(e). In relation to paragraph 23(d), Mr Islam pleads that he was entitled to register the security interests, and that he had legitimate grounds for opposing, and was successful in opposing, Mr Alamin's claim for interim relief which was dismissed by Slattery J. In relation to paragraph 23(e), Mr Islam pleads that he was entitled to issue the statutory demands to Amin Hadiqat, Amin Murooj, and Amin Property Group demanding payment of $3,250,000 under the Settlement Deed. Mr Islam denies the allegations in paragraph 24 of Mr Alamin's statement of claim.
In response to Mr Alamin's application to wind up the JV Companies on the just and equitable ground, paragraph 25 of Mr Islam's defence pleads that, whilst it is appropriate to wind up Amin Hadiqat, Amin Murooj and Amin Property Group because those companies have failed to comply with the statutory demands, Mr Alamin's claim for relief under s 461(1)(k) in relation to the JV Companies is untenable, and that Mr Alamin is estopped from making that claim. Paragraph 25 of Mr Islam's defence continues:
"d. … the plaintiffs' claims in respect of events subsequent to the Deed of Settlement are barred by virtue of the principles of Anshun estoppel and further or alternatively abuse of process;
e. … the plaintiffs' claims in respect of events subsequent to the Deed of Settlement are, in substance, an attempt to seek relief because of the plaintiffs' own failure to comply with the Deed of Settlement;
f. … these proceedings are, transparently and embarrassingly, an attempt by the first plaintiff to avoid the effect of his own failure to comply with the Deed of Settlement;
g. … any relief of any equitable nature would be denied to the plaintiffs having regard to their flagrant and ongoing failure to comply with the Deed of Settlement, and the decisions deliberately made by them to settle the earlier proceedings rather than make or pursue claims of the kind now made, being decisions made to avoid both the embarrassment of findings of dishonesty and the risk of the Court making an order for the winding up of the MH Group in that earlier proceeding;
h. … the plaintiffs do not wish to obtain the relief they seek in the nature of an order for the winding up of the MH Group companies, as evidenced by the settlement of the earlier proceedings and their commercial interest in receiving a return from the MH Group companies without the incurrence of the costs of a liquidation, and for this further reason, the proceedings are an abuse of process.."
Mr Islam denies the matters pleaded by Mr Alamin in support of his rectification claim.
Mr Islam denies Mr Alamin's allegations of misleading or deceptive conduct.
Mr Alamin has given evidence that the grounds of his dispute in relation to the debt that is the subject of the statutory demands are set out on his statement of claim filed in the Alamin proceedings (defined in Mr Alamin's affidavit as the "Alamin SOC"). Mr Alamin relies on the statement of claim in the Alamin proceedings as articulating the claims referred to above on which he relies in support of his application to set aside the statutory demands. Mr Alamin does not rely on the statement of claim in the Alamin proceedings as evidence of the factual basis of those claims in support of his contention in the statutory demand proceedings that the claims raise a genuine dispute dispute or offsetting claim.
Mr Alamin has deposed that :
"12. As stated in the Alamin SOC, it was my understanding and intention that the settlement of the Islam Proceedings was on the basis that I and my associated companies would pay Hamidul a half share of the expected future profit to be earned from the development of two properties which were the subject of the dispute between Hamidul and myself that led to the Islam SOC, at 11 and 82 Woolgen Park Road, Leppington NSW 2179 (Woolgen Properties).
13. It was never my intention or understanding that Hamidul would be able to seek payment of the 'Settlement Amount' in clause 4 of the Deed if either or both of those properties were not purchased by my companies for development. I understood that the purpose of the Islam proceedings was for Hamidul to claim that these properties should not have been brought by me or companies I controlled outside the terms of our existing joint venture, and where Islam alleged that I used funds of the Joint Venture to make that purchase.
14. My intention, and my understanding of the effect of the settlement in the Deed, was to clarify that we would continue our Joint Venture in respect of the existing properties owned by our joint venture companies, that we would be free to undertake any future developments by ourselves, and that I would pay half of the expected profits of the Woolgen Properties to Hamidul, shortly after the purchase of those properties, based on moneys I obtained from development presales. The reason I was confident about the possibility of those presales is that it is very difficult for members of the community that Hamidul and I belong to, to obtain finance to buy land, because of Islamic principles that prohibit the charging and payment of interest.
15. The purchase of the 11 Woolgen Property did not occur as I had assumed would occur at the time of entry into the Deed because I could not secure additional finance from Centuria Bass, before the vendors terminated the purchase agreement for that property and informed me that the property had been sold to another purchaser.
16. As both Hamidul and his solicitor, Foez Dewan of McCabes knew, Centuria Bass was a lender who had advanced funds to our joint venture on Islamic financing terms to purchase land for development. Centuria Bass had agreed to grant finance to enable the purchase of the 11 Woolgen Property. However, between the time when this finance was first obtained and when I was required to settle the purchase of the property, there was an increase in the amount I was required to pay for the 11 Woolgen Property. The finance I had obtained from Centuria Bass was not sufficient to cover the additional amount (the Shortfall Amount). I was not able to finalise the additional finance for the Shortfall Amount because Hamidal [sic] had registered a charge on the Personal Property Securities Register (PPSR) contrary to the terms of the proposed financing arrangements with Centuria Bass. Centuria would not grant me the finance unless the existing charge was removed and updated to reflect the financing terms. It was a term of the finance agreement I had with Centuria Bass that it would be the first ranking secured creditor. I understood that ranking behind Hamidul, even for a portion of the finance, was unacceptable to it, as communicated to me in correspondence from the finance Broker.
17. Subsequently, the vendor of 11 Woolgen Park purported to terminate the purchase contract of that property, and as a consequence, [Amin Hadiqat] has not acquired the 11 Woolgen Park property, with the consequence that [Amin Hadiqat] could not thereafter raise the funds from presales of lots from that property, which were to be the source of funds to pay the 'Settlement Amount' to Hamidul.
18. Not only has the company currently lost its initial deposit of $463,700 paid in respect of the 11 Woolgen Property, and further purchase instalments of $820,000, it has also lost the opportunity to profit from the development of the property as a consequence of Hamidul's conduct. Part of the claim in the Alamin Statement of Claim seeks damages from Hamidul for this conduct. The Alamin Statement of Claim also seeks rectification of the Deed to reflect the true intention of the Deed that the payment of the 'Settlement Amount' was conditional upon the purchase of the Woolgen Properties, as well as other relief."
The italics in paragraph 16 of Mr Alamin's affidavit are mine. The italicised words were permitted to be read subject to an order under s 136 of the Evidence Act 1995 (NSW) limiting them to evidence of Mr Alamin's state of mind about the knowledge of Mr Islam and his solicitor.
In his affidavit affirmed on 30 August 2023, Mr Islam gave the following evidence about his state of mind in relation to the Settlement Deed at the time it was entered into on 22 November 2022:
"23. The Deed states that the settlement sum is $3.25 million, to be paid by way of three instalments, with time being of the essence in respect of each payment.
24. Implicit in the settlement was that Mohammad and his Amin Group companies would retain their interest in 11 and 82 Woolgen, and neither any of the MH Group companies nor I would have any claim or interest in 11 and 82 Woolgen.
25. I did not agree to any of the payments of the settlement sum under the Deed to be dependent or linked in any way to any developments in respect of the properties at 11 or 82 Woolgen. I had no control over what Mohammad or Amin Group companies did or would do in relation to those properties after the proceedings were settled, and was never prepared to accept any settlement which linked the payment of the settlement sum to the expected future profits from 11 and 82 Woolgen. I was however aware that Mohammad had already presold and was in the process of further preselling a number of proposed subdivision lots for 11 and 82 Woolgen to raise funds, which funds he was able to apply in reduction of the settlement sum owed to me."
The Plaintiffs' written submissions stated that Mr Alamin also disputes Mr Islam's entitlement to issue the statutory demands as being:
"a. a breach of his fiduciary and contractual duties as a joint venturer, as part of Mr Islam's Wrongful Conduct …
b. a contravention of s 18 of the Australian Consumer Law, in relation to the circumstances of entry into the Deed …"
The first ground of dispute above referred to paragraph 23 to 25 of the statement of claim in the Alamin proceedings, and especially paragraph 25(b)(iii). If and to the extent that the Plaintiffs sought to rely on this as some other reason to set aside the statutory demands under s 459J of the Corporations Act, it was incumbent on the Plaintiffs to prove the existence of that reason. That would have required the Plaintiff to establish the existence and breach of the fiduciary and contractual duties as referred to in those paragraphs of the statement of claim in the Alamin proceedings. However, the Plaintiffs' submissions at the hearing of the statutory demand proceedings were confined to their contentions concerning the existence of a genuine dispute and the existence of a genuine offsetting claim referred to at [78]-[80] above. The first ground of dispute was thereby effectively abandoned.
The second ground of dispute above referred to paragraphs 32 to 36 of the statement of claim in the Alamin proceedings. As referred to at [69] above, that was a claim for loss allegedly suffered by Mr Alamin as a result of allegedly misleading or deceptive non-disclosures by Mr Islam to Mr Alamin, including non-disclosure that Mr Islam claimed or reserved the right to seek payment of the Settlement Amount even if the purchase of the 11 Woolgen Park and 82 Woolgen Park properties did not proceed. The Plaintiffs did not seek to prove the alleged misleading or deceptive conduct at the hearing of the statutory demand proceedings. Nor did the Plaintiffs direct any submissions to the reasons why any cause of action by Mr Alamin against Mr Islam for alleged misleading or deceptive conduct entitled the Plaintiffs to an order in these proceedings setting aside the statutory demands issued to them. The second ground of dispute is also taken to have been abandoned.
Accordingly, the issues to be determined in these proceedings are:
1. whether Mr Alamin's claim for rectification of clause 4 of the Settlement Deed on the grounds of the alleged common mistake, or alternatively on the grounds of Mr Alamin's alleged unilateral mistake, constitutes a genuine dispute about the existence of the debt claimed in the statutory demands, or a genuine dispute about whether that debt is presently due and payable; and
2. whether Mr Alamin's claim against Mr Islam for alleged breach of fiduciary duty in lodging and failing to remove the registered security interests, allegedly causing Amin Hadiqat to be unable to complete the purchase of the 11 Woolgen Park property, as pleaded and particularised in paragraph 23 of the statement of claim in the Alamin proceedings, constitutes a genuine offsetting claim and, if so, the genuine level of that offsetting claim and the amount of the "offsetting total" for the purpose of s 459H of the Corporations Act.
The Plaintiffs accepted as accurate the defendant's summary of the principles governing rectification for mistake:
"21. The legal principles governing a claim for rectification of a written contract are well settled. Relevantly:
(i) except in the limited circumstances described in (v) below, for relief by rectification to be available, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was a 'common intention' as to the effect of the agreement which had been made, and each intended that the written instrument was to conform, and give effect to, that agreement: Simic v NSW Land and Housing Corporation (2016) 260 CLR 85 (Simic) at [103] per Gageler, Nettle and Gordon JJ;
(ii) what must be established is the actual, sometimes called the 'true' or 'subjective' intention of the parties: Simic per Keifel J (with whom French CJ agreed) at [43];
(iii) it is the final intention i.e. the one present at the time the agreement was made, which is critical: Newey v Westpac Banking Corporation [2014] NSWCA 319 (Newey) at [170] per Gleeson JA;
(iv) the common intention effect to which is sought to be given must be known to each party: Ryledar Pty Ltd v Euphoric Pty Ltd [2007] NSWCA 65 (Ryledar) at [315] per Campbell JA;
(v) establishing that the true or actual intention of the parties is different to that which it is found the written instrument has achieved, requires 'clear and convincing' proof: Newey at [170]; Ryledar at [134]. It must be 'proved to a high standard', and 'in the clearest and most satisfactory manner': Simic at [46] and [103]; Fowler v Fowler (1859) 4 De G & J 250 at 265; 45 ER 97 at 103; Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (In Liquidation) [2019] NSWCA 11 at [12]-[13]; and
(vi) rectification for unilateral mistake requires special circumstances and is generally not available: see, for example, Meagher Gummow and Lehane, Equity Doctrines and Remedies (5th Edition, 2015), paragraph 27-125 at page 942. In cases of unilateral mistake, and assuming the relevant mistake is actually established, it will be necessary to prove knowledge of the existence of the mistake by the counterparty and deliberate conduct, by that party aimed at preventing discovery of the error in the written document. Taylor v Johnson (1983) 151 CLR 422 at 431."
The Plaintiffs emphasised that a common intention may be inferred from the context and circumstances in which the parties' bargain has been struck, referring to the judgment of Campbell JA in Ryledar, in which his Honour said: [23]
"In my view, when the fundamental requirement for granting rectification is a continuing common intention of the parties, it is of more assistance to concentrate on what is needed before an intention of the parties to a negotiation counts as a common intention. In my view, when that intention relates to the terms upon which they will contract with each other, it is still necessary for them to know enough of each other's intentions for it to be said that there is a common intention. They might come to know of each other's intentions in this way through those intentions being directly stated, or they might come to know of them through the various other means by which one person's intention can become known to another person. Those means can sometimes involve a process of conscious and deliberate inference. Those means can sometimes involve simply perceiving a gestalt in a series of events. Those means can depend to some extent on the people involved sharing a common understanding of how particular bodies of knowledge or markets or social institutions they are operating in work - the experienced surgeon, or the experienced chess player, can sometimes see what another surgeon, or chess player, is seeking to do, in a way that an inexperienced person cannot. What matters for present purposes is that for a negotiating party to perform actions or say words from which the other party can gather his or her intention is itself a form of communication. Negotiation of any contract takes place in a context in which various facts are known or assumed by the negotiating parties. Sometimes, for example, if a contract is negotiated in a context where there are well understood business practices and conventions, and nothing is said about those practices and conventions not applying, it can be legitimate to conclude that both parties to the contract intended to act in accordance with those practices and conventions, even if they did not expressly communicate to each other that they intended to act in accordance with those practices and conventions."
After a detailed examination of relevant authority, his Honour concluded: [24]
"… the common intention that is required to grant rectification is subjective. Even though there is a requirement for the intention to be disclosed before it can count as a common intention, that disclosure need not be by words that say in substance 'this is my intention'. The need for disclosure fills the role of being a limitation on the types of subjective intention that can be enforced through the remedy of rectification, or a limitation on the circumstances in which a subjective intention must exist before it can be enforced through the remedy of rectification. It still remains that proof of the subjective intention of the parties to the contract is fundamental to the grant of rectification. Hence it is not possible to ignore a factual finding by the trial judge, to the effect that he was not satisfied that the plaintiff intended the rebate to apply in relation to deliveries to any location within New South Wales outside the Sydney Metro locations, and look only to the correspondence for the purpose of finding a 'common intention'."
On the basis of the evidence adduced in these statutory demand proceedings, the claim for rectification of clause 4 of the Settlement Deed on the grounds of common mistake is not a strong claim. The countervailing arguments to which I have referred at [98]-[99] have considerable force. There is no evidence of words or conduct on the part of Mr Islam that disclose that he held the relevant intention at the time of entry into the Settlement Deed. Mr Alamin's evidence in these proceedings referred to at [83] above is limited to his own subjective intentions at that time. Mr Alamin does not purport to give evidence of Mr Islam's subjective state of mind, save for the opening words of paragraph 16 of his affidavit, which were admitted into evidence on a limited basis as referred to at [84]. As senior counsel for Mr Islam submitted, Mr Alamin's evidence alone, taken at its highest, would not establish a genuine rectification claim based on common mistake. However, Mr Alamin's evidence must be considered together with the circumstances to which I have referred at [100] above. There are arguments both ways about whether the correspondence exchanged between the parties contemporaneously with, or relatively contemporaneously with their entry into the Settlement Deed supports for the rectification claim. One the one hand, the 17 November 2022 letter conveying Mr Alamin's offer expressly stated that he would require a period of 12 months to pay most of the proposed settlement sum because the acquisition of 11 Woolgen Park and 82 Woolgen Park would need to be completed before he would be in a position to pay. [26] Mr Islam's evidence in these proceedings explains why completion of those acquisitions would be likely to put Amin Hadiqat and Amin Woolgen in funds, even before the land had been subdivided and developed. [27] On the other hand, that 17 November 2022 offer was overtaken by the terms of the Settlement Deed executed by the parties, including clauses 4 and 5. The letter from Mr Alamin's solicitors to Mr Islam's solicitors dated 23 December 2022 states that the terms of clause 4 were "predicated on" completion of the 11 Woolgen Park acquisition, and contends that Mr Islam's solicitors were aware of this. However, the letter also contains a request for Mr Islam's consent to an extension of time for payment of the first instalment of the Settlement Amount under clause 4. That request is arguably inconsistent with any intention on the part of the Amin parties, let alone a common intention of all parties to the Settlement Deed, that the payment obligations in clause 4 would be conditional on the completion of the 11 Woolgen Park and 82 Woolgen Park acquisitions.
The claim for rectification of clause 4 of the Settlement Deed based on the alleged common intention and common mistake pleaded in the Alamin proceedings is a bona fide claim. The claim was first made on 12 May 2023 - approximately one month prior to the service of the statutory demands. [28] The claim raises a plausible contention requiring investigation for the reasons that I have explained above. It is not to the point that there are countervailing arguments. The relative merits of the claim and the countervailing arguments are to be assessed at final hearing, and not on the present applications to set aside the statutory demands. [29] If the rectification claim ultimately succeeds, it will follow that the debt claimed in the statutory demands is not presently due and payable. Accordingly, the rectification claim constitutes a genuine dispute for the purpose of s 459H of the Corporations Act, and the statutory demands must be set aside.
It is not necessary to address whether the alternative rectification claim for unilateral mistake constitutes a genuine dispute. Nor is it necessary to address whether the claim for Mr Islam's alleged breach of fiduciary duty constitutes a genuine offsetting claim. For the avoidance of doubt, my determination that the rectification claim based on common mistake constitutes a genuine dispute for the reasons explained above, does not involve acceptance of the Plaintiffs' contention that the Settlement Deed varied the relationship between Mr Islam, Mr Alamin and their respective associated companies - which the Plaintiffs characterise as a joint venture relationship - to include the 11 Woolgen Park and 82 Woolgen Park properties until such time as the Settlement Amount is paid in full.
The costs of the statutory demand proceedings should follow the event. The Plaintiffs seek their costs on an indemnity basis, relying on an open offer made on 6 September 2023 to "compromise" the proceedings on terms that the statutory demands were withdrawn and each party would bear its own costs. That offer effectively invited Mr Islam to capitulate. I do not consider that Mr Islam acted unreasonably in failing to accept the offer, having regard to the cogent arguments available to him to defend these proceedings, including those arguments referred to at [98]-[99] above. I therefore decline to exercise the discretion under s 98 of the Civil Procedure Act 2005 (NSW) to order Mr Islam to pay the Plaintiffs' costs on an indemnity basis.
Creata (Aust) Pty Ltd v Faull (2017) 125 ACSR 212; (2017) 35 ACLC 17-056; [2017] NSWCA 300 at [44] (Barrett AJA, Gleeson and White JJA agreeing).
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Decision last updated: 15 December 2023