Australian Broadcasting Corporation v O'Neill

Application for JK3 to be joined as plaintiff in the proceedings

1. I now turn to the relief sought by Mr and Mrs Khattar and JK3. First, they seek an order pursuant to UCPR r 6.19 or 6.20 that JK3 be joined as the Fifth Plaintiff to the proceedings. Rule 6.19 of the UCPR provides that two or more persons may be joined as plaintiffs in an Originating Process if separate proceedings by each of them would give rise to common questions of law or fact and all rights of relief claimed in the Originating Process are in respect of, or give rise to, the same transaction or series of transactions, or if the Court gives leave for them to be joined. Rule 6.20 provides that all persons jointly entitled to the same relief must be joined as parties in any claim for that relief that is made by any one more of them and, unless the Court orders otherwise, any other such person is to be joined as a plaintiff, if he or she consents to being a plaintiff, or if there is no consent to be a plaintiff, as a defendant. Mr Condon's opening submissions suggest that Mr and Mrs Khattar and JK3 primarily rely on UCPR r 6.19, in respect of proceedings involving common questions of law or fact, rather than UCPR r 6.20, for this relief.
2. Mr and Mrs Khattar and JK3 support the joinder of JK3 as a Plaintiff in the proceedings on the basis that it is a beneficiary named in the Resulting Trust Deeds and a party to the UJVA; Mr and Mrs Khattar are shareholders in and Mrs Khattar is the director of JK3; and Hills Shoppingtown holds the relevant site as trustee for the beneficiaries under the Resulting Trust Deeds. These propositions provide no support for the joinder of a party which does not seek relief in the proceedings as they stand. Mr and Mrs Khattar and JK3 in turn foreshadow several further allegations as to Hills Shoppingtown which are also not advanced in the present proceedings, and which it would not be appropriate to address unless an amendment is made, with leave, to introduce them in the proceedings. Mr Condon submits that JK3 proposes to seek relief, by a future amendment of the Statement of Claim, but it seems to me that that provides no reason for it to be joined to the proceedings before an Amended Statement of Claim is prepared, identifying the relief that it seeks and the material facts which are relied upon for that claim, and the Court determines whether leave should be granted to file that Amended Statement of Claim in the usual way. Where JK3 presently seeks no relief in the proceedings, I can see no basis on which it should be joined as Plaintiff in them.
3. I recognise that PCPL appointed receivers and managers to JK3 following a change in the directors of JK3 from Mr Fayad to Mrs Khattar. Initially, the solicitors for the receivers and managers to JK3 took the position (Tannous 9.9.20, Ex CT-44) that: "In circumstances where receivers and managers have been appointed to JK3, your clients are no longer in control of the management of JK3 … The receivers and managers do not intend to press any relief sought in the Interlocutory Process and will inform the Court of that Fact. While this may well have no bearing on the relief sought by your other clients, you are no longer able to act for JK3."
4. By an email dated 1 October 2020, Mr Tannous advised the solicitors for the receivers and managers to JK3 that, despite the appointment of the receivers and managers, Mr and Mrs Khattar maintained that the directors of JK3 were entitled to seek to have JK3 joined as a Plaintiff in the proceedings and to seek production of documents on behalf of JK3 and that "the Court will ultimately determine" that question. By a response dated 2 October 2020, the solicitors acting for the receivers and managers took a narrower, and qualified position, that: "[A]t this stage the receivers will adopt a neutral position with regard to the Interlocutory Process filed by [Mr and Mrs Khattar and JK3]. However, the receivers reserve their rights to take an active role in the proceedings should they determine that to be necessary and in the best interests of the conduct of the receivership."
5. In his opening submissions, Mr Condon addresses the question whether receivership is a bar to the joinder of JK3. Mr Coleman, with whom Mr D'Arville appears for the Second-Sixth Defendants, submits that Mr and Mrs Khattar have no authority to make decisions on behalf of JK3 and the order joining JK3 as party to the proceedings cannot be made where the receivers do not consent to its joinder. As I noted above, the receivers and managers have subsequently taken a somewhat more qualified position. In submissions in reply, Mr and Mrs Khattar repeat the contention that the receivers' power to commence proceedings does not divest directors of the company of their power to institute proceedings, if their doing so does not prejudice the position of the receivers' appointor. It is not necessary to determine whether the directors of JK3 would or would not be entitled to cause JK3 to bring this application or wider proceedings, after receivers and managers were appointed, where JK3 would not in any event be joined to the proceedings when it presently seeks no substantive relief in them.

Application for order for production of documents

1. Second, Mr and Mrs Khattar seek an order, pursuant to the Court's inherent jurisdiction or ss 68 or 90 of the Civil Procedure Act 2005 (NSW) that, within 3 business days, the Second-Sixth Defendants produce, or permit Mr Khattar to inspect and copy, specified books and records of Hills Shoppingtown. Section 68 of the Civil Procedure Act relevantly provides that the Court may order a person to produce a document or thing to the Court. Section 90 of the Civil Procedure Act provides that the Court is, at or after trial or otherwise as the nature of the case requires, to give such judgment or make such order as the nature of the case requires. There has here been no trial or merits determination of the proceedings.
2. The document production orders sought by Mr and Mrs Khattar depend in part on the proper construction of orders 12 and 14 of the 21 July Orders, to which I referred above. By email dated 5 August 2020, (Ex A1, 347) Mrs Khattar requested a list of documents which overlaps with those now sought by the Interlocutory Process in respect of Hills Shoppingtown. By email dated 7 August 2020 (Ex A1, 359), Mrs Khattar's solicitor, Mr Tannous, contended in respect of the request by Mrs Khattar that: "Hill[s] Shoppingtown is a Defendant in the proceedings and the purpose for the documents is for the express purpose of this legal proceedings." On 19 August 2020, Mr Khattar made a similar request for documents (Ex A1, 364).
3. The Defendants subsequently provided access to several documents requested by Mr Khattar and Mrs Khattar by identifying their locations on the Dyldam Group's servers, to which Mr and Mrs Khattar and their solicitor have had a degree of access. They contended that several other documents which Mr and Mrs Khattar had requested were "highly commercially sensitive and strictly confidential and could not be released without the express consent of the counterparty(ies)" and that that consent had been requested. The Defendants in turn made a somewhat perfunctory request to the lender for that consent, which was withheld, although neither the Defendants nor the lender troubled to identify any legal basis on which its consent to release of the documents was required or on which it was entitled to withhold that consent. A claim for commercial confidentiality would be no answer to a requirement under 21 July Orders if, contrary to the view which I reach below, such a requirement was established.
4. The documents which Mr and Mrs Khattar seek to have produced were identified in five paragraphs and several sub-paragraphs. They broadly reflect documents which, as I noted above, Mrs Khattar and then Mr Khattar, by their solicitors, had previously sought access by correspondence. Mr and Mrs Khattar seek this order on the basis that the Second-Sixth Defendants had not complied with orders 12 or 14 of the 21 July Orders. It is common ground between the parties that each of those orders imposed an obligation on the Defendants to do things "reasonably necessary" to provide copies of the relevant documents, "for the express purpose of this legal proceeding". The Second-Sixth Defendants contend that the 21 July Orders only require production of documents relating to matters in issue in the proceedings. Mr and Mrs Khattar contend that they extend more widely, not only to documents relating to matters in issue in the proceedings, but also to matters which they propose to include in the proceedings (or, more precisely, to seek leave to include in the proceedings). It is apparent that the categories nominated for production by Mr and Mrs Khattar extend to documents relating to matters that are not presently in issue in the proceedings, including matters arising from Hills Shoppingtown's entry into the 5 June Facility, which occurred after the proceedings were commenced in late May 2020 and which is not raised on the present pleading.
5. Mr Condon submits, in opening submissions that: "The requirement that the documents be for the express purpose of the proceedings requires a nexus between the requested documents and the litigation; that nexus would be satisfied if the documents advanced, or were capable of advancing, the Plaintiffs' case. Such might be the case if the documents assisted prove an existing pleading or a pleading that was reasonably available."
6. The first sentence in that submission is plainly correct, on the basis that the "Plaintiffs' case" is understood as to the case pleaded by their Statement of Claim filed in the proceedings. I do not accept the submission put in the second sentence of that paragraph. A pleading that is "reasonably available" but has not been advanced forms no part of the present proceedings, and documents relating to it are not, in my view, sought for the express purpose of the proceedings. In opening submissions, Mr and Mrs Khattar also foreshadow the content of their proposed amended pleadings in respect of the PCPL Facility and 5 June Facility. I need not address those matters at this point, and the proper time to do so will be when an amendment is made, with leave, that introduces those allegations in the proceedings. Mr Condon also refers, in oral submissions, to case law and commentary as to questions of the interpretation of orders, but no subtle question arises in this application which requires any detailed consideration of that case law or commentary. Mr Condon also submitted that the orders sought to compel compliance with the 21 July Orders were within the Court's inherent jurisdiction to prevent undermining its authority and relied on ss 68 and 90 of the Civil Procedure Act and s 65 of the Supreme Court Act 1970 in that respect. That question does not arise since I find that the 21 July Orders did not require production of the documents sought by Mr and Mrs Khattar, and the Court's authority was not undermined when the Defendants did not do what the 21 July Orders did not require them to do.
7. Mr Coleman in turn takes issue with Mr Tannous' evidence, in paragraph 64 of his first affidavit, that the documents sought are required by Mr and Mrs Khattar in order to make the proposed amendments to the Statement of Claim. Mr Coleman submits that the documents are not necessary for that purpose, in respect of the PCPL Facility, because Mr and Mrs Khattar have already identified the matters of which they are aware in the Statement of Claim and the Second-Sixth Defendants do not contend they cannot understand the claim that is made against them. He submits that the documents are not required to formulate relief sought in respect of Hills Shoppingtown, which is currently identified at paragraphs 59-72 of the relief claimed in the Statement of Claim.
8. In reply, Mr Condon submits that Mr and Mrs Khattar's submissions identify the relevance of the documents to the claims already pleaded in addition to their relevance to proposed further claims. Mr Condon refers to the purpose for obtaining the documents in relation to the PCPL facility, which is a matter addressed in submissions in chief, and to the claim in respect of the 5 June Facility as a matter "in respect of which relief will be sought". Mr Condon also submits that access to documents is not the only relief that Mr and Mrs Khattar seek and they require the documents to plead their claims.
9. It seems to me that, as a matter of the objective construction of orders 12 and 14 of the 21 July Orders, they do not create a position where documents are required to be produced by the Defendants in a manner that is unconstrained by any question of relevance or legitimate forensic purpose determined by reference to the matters presently in issue in these proceedings, so that the only constraint on the requirement for the Defendants to take reasonable steps to produce the requested documents is the limits of Mr and Mrs Khattar's ambition as to what matters might in future be included in the proceedings, by adding additional parties or making further amendments to the proceedings. The contrary view would leave it open to Mr and Mrs Khattar to request such documents as they wish, in respect of any company of which Mr Khattar or Mrs Khattar was a director within the previous seven years, to conduct an exploration of matters which they might now wish (or claim to wish) to include in the proceedings, but ultimately do not include in the proceedings, either because they choose not do so, or because the Court will not permit a further amendment to include those matters in the proper application of s 56-58 and 64 of the Civil Procedure Act. It seems to me that a request for production of documents for the purpose of investigating whether a matter might be advanced within an amended or reconstituted proceeding, involving different parties (for example, JK3) is not a request made for the express purpose of "this legal proceeding".
10. In the course of oral submissions, I pointed out to Mr Condon that, if a narrower range of documents was sought on the basis that they were presently in issue in these proceedings, as distinct from relevant to possible future amendments to the proceedings, they would need to be identified by Mr and Mrs Khattar so that the Defendants had an opportunity to respond to that identification. Mr Condon then identified, in a somewhat general way, the modifications which might be made to the categories of documents that Mr Khattar has sought so that they reflected matters that were presently in issue in the proceedings. However, it seems to me that I should address the order sought for production of documents as it stands, and not on a narrower basis which Mr and Mrs Khattar did not advance. In my view, the Second-Sixth Defendants were entitled to respond to the request for documents that Mr Khattar and Mrs Khattar made, and were not required to reformulate a different request that the Mr Khattar or Mrs Khattar might have made and then respond to that different request. It seems to me that the Court should similarly deal with the application which Mr and Mrs Khattar made, not a different application which might have been made, and should not reformulate narrower categories of documents to be produced so as to allow Mr and Mrs Khattar a result they did not seek. On that basis, the order sought in this aspect of the Interlocutory Process should be refused. No doubt, Mr Khattar or Mrs Khattar can, if so advised, reformulate a narrower request in a manner that reflects the matters that are presently in issue in the proceedings; or Mr and Mrs Khattar can bring an amendment application, if they have a proper basis to do so, and, if that amendment is permitted, then make a further request in respect of the matters that are then in issue in the proceedings.

Order for access to documents sought by JK3

1. Third, and alternatively, JK3 seeks (or, possibly, Mr and Mrs Khattar and JK3 seek) an order under s 68 of the Civil Procedure Act, JK3's "general law rights as a beneficiary" and under cl 7.4 of the UJVA that Hills Shoppingtown produce the documents requested by Mr Khattar to JK3. Mr Condon submits that the stated purpose of the UJVA (as recorded in recital E) was to give Hills Shoppingtown, as trustee, discretion and power to deal with the Hills Shoppingtown properties and make decisions in relation to its development and that the UJVA requires Hills Shoppingtown to exercise powers granted under the UJVA in the best interests of the Companies (as defined) as a whole. JK3 relies (or Mr and Mrs Khattar and JK3 rely) on cl 7.4 of the UJVA for JK3's entitlement to access and inspect records and accounts maintained by Hills Shoppingtown as trustee for the purpose of the joint venture.
2. Mr Coleman submits that this aspect of the application seeks access to documents, on behalf of JK3, for the purposes of amending an application which in large part also seeks production of documents by various companies to the Plaintiffs, and where Mr Tannous' affidavit refers to JK3's right to documents as one of the matters that will be agitated in any amendment to the proceedings (Tannous 9.9.20 [64(d)]). Mr Coleman submits that it is "nonsensical" for Mr and Mrs Khattar and JK3: "to suggest that the extensive suite of documents sought on an interlocutory basis are needed so as plead a right to relief on a final basis to access books and records which include those very documents."
3. This aspect of the application is presently brought by JK3 as a non-party to the proceedings (or, possibly, by Mr and Mrs Khattar and JK3 in reliance on JK3's rights) and seeks substantive relief of a similar kind to that which the Plaintiffs seek in the substantive proceedings. If JK3 were a party to the proceedings, I would have deferred this application to allow it to be determined at the final hearing together with other applications by other Plaintiffs for the production of other documents. It does not seem to me that it would promote the just, quick and cheap resolution of the real issues in dispute in these proceedings to fragment them, by permitting the Plaintiffs (still less non-parties) to file Interlocutory Applications at will, so as to have the Court deal in a fragmented way with issues that overlap with those raised at a final hearing. Where JK3 is not party to the proceedings, and Mr and Mrs Khattar do not have standing to assert its rights in their personal capacity, no question of deferring this aspect of the application to a final hearing arises, because the application is not properly brought in these proceedings.
4. As I noted above, it is open to Mr and Mrs Khattar and JK3 to formulate an Amended Statement of Claim which seeks substantive relief on the part of JK3 and then to seek leave to file that Amended Statement of Claim and join JK3 to the proceedings. If an amendment application of that kind is successful, then any application for access by JK3 to documents of Hills Shoppingtown raised by that application can be determined at the final hearing at the same time as the other applications by other Plaintiffs for production of documents by other Defendants. Alternatively, JK3 can (subject to any issue arising from the appointment of the receivers and managers to it) commence such other substantive proceedings as it may be advised in respect of that issue, which may or may not then be ordered to be heard together with these proceedings.

Application for injunctive relief

1. Mr and Mrs Khattar also seek an order in the Court's inherent jurisdiction or under s 66 of the Supreme Court Act that Hills Shoppingtown be restrained from borrowing monies or otherwise encumbering its assets without giving five days' notice in writing to Mr and Mrs Khattar. Although that application did not indicate which of the Plaintiffs sought that relief and whether it was sought as interlocutory or final relief, Mr Condon indicated in the course of oral submissions that the relief was sought by Mr Khattar and that it was interlocutory in character. Mr Condon submits that Mr Khattar, as a member of Holdings 88, seeks leave under s 237 of the Corporations Act 2001 (Cth) to commence derivative proceedings in the name of Holdings 88 against Hills Shoppingtown by reference to oppression under s 233 of the Act, and submits that the Court has jurisdiction, under s 1324 of the Act or at general law, to grant interlocutory relief in the form of an injunction prior to the grant of such leave. Mr Condon relies on the observations of White J (as his Honour then was) in Fayad v Bellpac Pty Ltd [2004] NSWSC 755 in that respect. I will assume, without deciding, that the Court has power to grant an injunction although an application for leave to bring derivative proceedings has not been brought, although it is not apparent to me why such a power would be required where the Act itself permits such leave to be sought and granted on an interim basis.
2. Mr Coleman submits that there is no evidence of any matter which would justify the interlocutory injunction sought, and that the only relevant evidence is that drawdowns from lenders of Hills Shoppingtown were not received in the Hills Shoppingtown account, which he contends would not be surprising where amounts from the facility are used to pay the project's expenses. In submissions in reply, Mr Condon responds by again pointing to the evidence on which Mr and Mrs Khattar rely for an allegation that monies drawn down under the PCPL Facility had been paid to companies associated with Mr Sam Fayad, and then repeat submissions as to other matters which appear to have limited connection with the relief that is sought, or with rights that can be asserted by Mr Khattar or Mrs Khattar, as distinct from other entities which are shareholders in the relevant companies or parties to the relevant agreements.
3. In determining whether to grant an interlocutory injunction of the kind sought by Mr Khattar, I should apply the principles set out by the High Court of Australia in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at 65; [2006] HCA 46. In order to obtain interlocutory relief, Mr Khattar must demonstrate a prima facie case or serious question to be tried as to his entitlement to the relief sought at the final hearing, but also that damages would not be an adequate remedy, so as to warrant the grant of injunctive relief, and that the balance of convenience favours the grant of an injunction on an interlocutory basis. The considerations whether Mr Khattar has a seriously arguable case for final relief and the balance of convenience are interrelated. The greater the extent to which the balance of convenience favours one course over another, the less strong a case for final relief might be required to justify an injunction.
4. The evidence at least raises the possibility that amounts borrowed by Hills Shoppingtown have been or could be applied for purposes other than those of the company or the trusts and I will assume, without deciding, that a serious question to be tried is established. I am not satisfied that the balance of convenience supports the grant of relief in the form sought. Mr Khattar is a shareholder in a company which holds shares in Hills Shoppingtown, apparently as bare trustee, and it is not possible to identify any legal or other right which Mr Khattar has in that capacity to be consulted in respect of, or to veto, the borrowing of monies by Hills Shoppingtown for any purpose. Second, as Mr Coleman points out, the interlocutory relief that sought in this respect is not directed to supporting any final relief restraining borrowing monies or the encumbrance of assets by Hills Shoppingtown, since no such relief is presently sought in the proceedings.
5. I recognise that Mr Condon also submits that the evidence establishes a prima facie case of oppression, referring to matters which in part are not presently pleaded, and in part relate to claims of JK3 which is not party to the proceedings. Assuming, without deciding, that a prima facie case of oppression could be established in respect of a pleaded case by a party to the proceedings, it does not seem to me that the interlocutory relief sought by Mr Khattar is directed to that pleaded case. To the extent that the relief is sought by reference to a wider proposition that Hills Shoppingtown continues to borrow money "in circumstances which potentially benefit unrelated parties", it does not seem to me that contention would support relief that extends to any borrowing of Hills Shoppingtown and not only a borrowing for the benefit of an "unrelated party".
6. Mr Khattar also seeks an order under s 1324 of the Corporations Act in the same terms as the relief sought by way of interlocutory injunction in the Court's inherent jurisdiction or under s 66 of the Supreme Court Act. The Court has power to make an order under s 1324 of the Act on the application of an interested person where a threatened contravention of the Corporations Act is established, and has power to make such an order on an interlocutory basis. The Court may grant an interim injunction pending the final determination of the matter: s 1324(4). There is some authority that equitable principles such as whether there is a serious question to be tried and the balance of convenience may be relevant to the grant of an injunction under this section, on the application of a person other than ASIC, and that an interim injunction should not be granted under s 1324(4) unless there is a serious question to be tried as to the applicant's entitlement to final injunctive relief under s 1324(1): Australian Securities and Investments Commission v Marshall-Bell Hawkins Ltd (2002) 43 ACSR 340; [2002] FCA 1511; Australian Securities and Investments Commission v Mapstone (2006) 59 ACSR 214; 24 ACLC 1246; [2006] NSWSC 993 at [34]. The better view may be that the Court's power to grant an interlocutory injunction under this section is not limited by equitable principles, but it should have regard to whether there is a serious question to be tried and the balance of convenience and would likely not grant that injunction where it would not have done so in its equitable jurisdiction, unless matters relating to the relevant statutory obligations or the public interest require it to do so: CME Properties (Australia) Pty Ltd v Prime Capital Securities Pty Ltd [2016] WASC 231 at [13]; Morara Pty Ltd v Kingslane Property Investments Pty Ltd [2019] WASC 136 at [51]-[52] .
7. It does not seem to me that the Court would make an order under s 1324 of the Act in the form sought by Mr Khattar, which restrains all borrowings of monies or encumbrance of assets by Hills Shoppingtown, without the giving of notice to Mr Khattar, where no basis is shown for any general proposition that any borrowing of money by Hills Shoppingtown without Mr Khattar's consent, or without prior notice to him, would or might contravene the Act.

Orders and costs

1. For these reasons, the Interlocutory Process should be dismissed and Mr and Mrs Khattar should pay the costs of the parties that appeared in respect of the Interlocutory Process, as agreed or as assessed.

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