Ahmed Saadeldin
92 Mr Saadeldin relied upon the following material:
(a) two affidavits affirmed by Mr Saadeldin dated 9 April 2019 and 29 July 2019;
(b) an affidavit of Aisha El-Hag dated 29 July 2019;
(c) an affidavit of Salem Al Baidhani dated 30 July 2019;
(d) an affidavit of Jamal Nor dated 29 July 2019; and
(e) an affidavit of Sharmarke Ahmed dated 12 March 2019.
93 Mr Saadeldin is a marketing executive. In his first affidavit he deposed that in or about May 2010 he paid $180,000 to Timeline, made up as follows; $70,000 in cash paid to Mr Isaacs in person, $40,000 by cheque to Timeline; $20,000 by cheque to Timeline; $40,000 by cheque to Timeline; and $10,000 by bank transfer to Timeline. He said that he did so pursuant to an agreement with Timeline that it would repay those sums plus a fixed return profit of $31,000 by the end of May 2011.
94 He said that by 25 August 2011 Timeline had repaid only $16,000 of the loan. Mr Saadeldin deposed that Timeline acknowledged that debt in a document dated 25 August 2011, which is exhibited to his affidavit (the 2011 Statement) signed by the then directors and company secretary of Timeline, Mr Ahmed and Mr Isaacs. He submitted that the 2011 Statement created an equitable charge over the assets of Timeline and over any rights or entitlement it may have had in respect of the Lara Property.
95 On his evidence Timeline still did not repay the loan (except for $16,000) and he therefore sought legal advice and notified Timeline of his intention to take legal action. He said that Mr Ahmed and Mr Isaacs met with him in 2013 and agreed that $195,000 was still owing to him. At the meeting Mr Ahmed and Mr Isaacs said that Timeline owned blocks of land in the Lara Property and that a new agreement could be made to guarantee that he would be repaid the money he was owed plus the agreed profit. He deposed that the parties entered into an agreement dated 25 July 2013, which is exhibited to his affidavit (the 2013 Agreement).
96 The recitals to the 2013 Agreement state that Timeline agreed to repay the sum of $180,000 to Mr Saadeldin and that it had failed to do so. In particular, recitals D and E provide:
D. [Timeline] is involved in a property development project at Lara, more particularly described as Lara Property Development at 490 Flinders Avenue, Lara. As a result of this involvement in the said property project, [Timeline] is entitled to a number of blocks of land.
E. [Timeline] has agreed to transfer to Saadeldin four blocks of land on an approximate size of 680m2 each in consideration of the investment of $180,000 having been made by Saadeldin to [Timeline].
97 The 2013 Agreement provides that Timeline would transfer to Saadeldin four blocks of land in consideration of Mr Saadeldin releasing Timeline from his claim for $180,000, and that if Timeline could not transfer the four lots by 2021, it would instead pay Mr Saadeldin the sum of $320,000. The 2013 Agreement was executed between Mr Saadeldin on the one hand and Ms McKeown (director of Timeline), Mr Ahmed and Mr Isaacs on the other. Under the 2013 Agreement, each of the directors of Timeline personally guaranteed the performance by Timeline of its obligations under the 2013 Agreement.
98 In his second affidavit Mr Saadeldin explained that the $180,000 he paid to Timeline was paid to him by others, namely;
(a) $50,000 from his mother, Aisha El-Hag, on behalf of his sister Marwa Saad El-din;
(b) $70,000 from his brother-in-law Salem Al Baidhani on behalf of his wife Zenap Al Sabri; and
(c) $60,000 from Jamal Siraj Nor.
He said that once he received those funds he paid $180,000 to Timeline and he pointed to the 2013 Agreement which said that the costs associated with having each of the four blocks of land registered in the names of the owner would be borne by him, Marwa Saad El-din, Ms Al Sabri and Mr Nor.
99 In her affidavit Mrs El-Hag deposed that in 2010 she paid $50,000 in cash to Mr Saadeldin to be applied towards an investment in Timeline, with the intention that the return on the investment would be given to her daughter, Marwa Saad El-din. She deposed that she withdrew $32,300 from her Muslim Community Co-operative (Australia) Pty Ltd bank account on 9 October 2009 and exhibited a copy bank statement showing that withdrawal. She said that the balance of the money came from her Commonwealth Bank account, but she had been unable to obtain bank statements from the Commonwealth Bank which dated back to 2009-2010. To show that she had the financial capacity to advance that amount she said that she had been employed at the Doutta Galla Community Centre for almost 20 years as a permanent/part-time community worker. She exhibited Commonwealth Bank statements to show the deposits of her employment income and also to show what she said was a regular practice of withdrawing cash and keeping it for savings and potential investments, such as the one made with Mr Saadeldin in May 2010.
100 Mr Al Bahaini deposed that in early May 2010 he paid $70,000 in cash to Mr Saadeldin to be applied towards an investment in Timeline, with the intention that the return from the investment would be given to his wife, Ms Al Sadri. He said that he personally gave the money to Mr Saadeldin in the presence of a witness, Mr Saadeldin's friend Mr Nor. Mr Al Bahaini was employed as a taxi driver, but he said that he obtained the funds for the investment from an inheritance upon the death of his father in early 2009, which money had been passed to him over a period of time by overseas relatives.
101 Mr Nor's affidavit corroborated Mr Al Bahaini's account that he gave $70,000 in cash to Mr Saadeldin in about May 2010. In relation the advance that he made he said that he was a close friend of Mr Saadeldin and he gave him $60,000 in cash to be applied towards an investment in Timeline. He said that $40,000 of that amount was drawn from his savings and the balance was made through a $20,000 personal loan, but he had not been able to obtain any documentation or bank statements going back to 2010 to show that loan. To show that he had the financial capacity to make such an advance he put on evidence to show that he had worked as a confectioner on a full-time basis for more than 10 years at Mondelezs Australia, earning more than $1,500 per week after tax, of which he saved a large portion. He exhibited a letter from his employer confirming his employment. He said that he and his wife owned a property at 4 Somersby Road, Craigieburn, that he was up-to-date on the mortgage payments, and he exhibited a copy ANZ Bank statement evidencing the mortgage. He also exhibited copy Commonwealth Bank statements from 2011 which showed deposits of his wages and what he said was a regular practice of withdrawing cash and keeping it for savings and potential investments, such as the one made through Mr Saadeldin in May 2010.
102 Mr Saadeldin gave oral evidence in the hearing. He testified that he provided the $180,000 to Timeline as a property investment, pursuant to an agreement with Mr Ahmed and Mr Isaacs whereby he would have that amount returned plus a fixed profit of $31,000 within one year. He said that when Timeline failed to repay the monies he sought legal advice and then drafted the 2011 Statement which set out how much he had paid and how much he was still owed, which acknowledgement Mr Ahmed and Mr Isaacs signed. Then when Timeline still failed to repay the monies owed he went to see Mr Ahmed and Mr Isaacs and said that he intended to take them to court because he needed to get back the monies he had advanced. He said that Mr Ahmed and Mr Isaacs told him that they had a land project in Lara which would be very lucrative, and rather than paying him in cash they would prefer to give him four blocks of land from that project. He went to see a solicitor who drafted the 2013 Agreement and after some "back-and-forth" Timeline, its directors and he signed the agreement.
103 He reiterated that none of the $180,000 that he paid was his own money, and it had all been provided to him by his close relatives or by his best friend Mr Nor for the purpose of making a property investment. He said that at the time he made the investment the Lara Property scheme was on foot and Timeline had been holding meetings with people within the Islamic community and he wanted to be sure that he, his mother and his friends would be part of that. He said that, having received monies from his mother, brother-in-law and best friend to make the planned investment, unless he could obtain a return of the monies he would be forced to mortgage his home so that he could repay his relatives and friend.
104 Mr Saadeldin also relied upon the affidavit of Mr Ahmed who said that at the time of the Timeline's incorporation he and Mr Isaacs agreed that Timeline would receive 10 blocks of land from REIT upon the completion of the Scheme. Mr Saadeldin relied upon that evidence as showing that Timeline had an entitlement to receive blocks of land through the Scheme. That was put in support of his contention that Timeline had agreed to give him for blocks in return for his $180,000 investment.
105 The Receivers' recommended that Mr Saadeldin should not be paid any amount. They contended that Mr Saadeldin's account was implausible because:
(a) despite repeated requests Mr Saadeldin had not produced any evidence to support the payment of $180,000 other than his own affidavit and the written acknowledgements of the Directors of Timeline in the 2011 Statement and the 2013 Agreement. The Receivers said that there was no primary documentation to support the contention that Mr Saadeldin had paid those monies, such as a cheque butt, bank statement or a transfer statement;
(b) Mr Saadeldin said he paid the money to Timeline in May 2010, when:
(i) Timeline was not incorporated until about five months later Timeline in August 2010;
(ii) the Liquidators' investigations show that Timeline did not open a bank account with HSBC until 26 October 2010, and the bank statements for that account do not show any deposits that correspond to the individual payments allegedly made by Mr Saadeldin; and
(iii) the Lara Property was not purchased until July 2010;
(c) on Mr Saadeldin's account the $180,000 was for an investment in property. The evidence shows that Mr Ahmed had difficulties in paying the deposit on the purchase; paying $50,000 towards the purchase but being unable to pay the full $97,000. If, in fact, Mr Ahmed had $180,000 paid by Mr Saadeldin he would not have had that difficulty; and
(d) there is no document to show the repayment of $16,000 by Timeline to Mr Saadeldin.
106 In relation to the 2013 Agreement the Receivers contended that if there is no evidence to establish that Mr Saadeldin paid $180,000 to Timeline pursuant to an agreement made in 2010 (evidenced by the 2011 Statement) then the 2013 Agreement fails because it is premised on the $180,000 having been advanced. Further, while the recitals to the 2013 Agreement state that Timeline is entitled to a number of blocks of land from the Lara Property the Receivers found no evidence to support that entitlement; that is, no agreement nor registrable instrument provided for any such entitlement and such an agreement would be contrary to the PDS which provided that Timeline was entitled to management fees and nothing more. On this argument the 2013 Agreement was a nullity because Timeline could not promise to give something to Mr Saadeldin to which it had no entitlement.
107 The Receivers recommended that Mr Saadeldin be paid nothing from the Fund. But in the alternative, in the event the Court was satisfied that Mr Saadeldin had in fact advanced $180,000 to Timeline, the Receivers recommended that he should be paid that amount from the Fund as a creditor of Timeline.
108 Contrary to the Receivers' primary submission, I was satisfied that it was more likely than not that Mr Saadeldin advanced $180,000 to Mr Ahmed and Mr Isaacs to make a property investment through Timeline.
109 Although the absence of any cheque butts, bank statements or transfer documents evidencing the advance of the money was concerning, the absence of such evidence must be seen in context. The evidence tends to show that Mr Saadeldin, his family members and Mr Nor are unsophisticated and, for reasons which the evidence does not explain, they preferred to deal in cash. On the other side of the alleged agreement to provide $180,000 for a property investment through Timeline were Mr Ahmed and Mr Isaacs who promoted and were closely involved in the operation of a managed investment scheme which failed to keep proper records, failed to produce appropriate records when required by ASIC, and in relation to which there are monies unaccounted for and grounds for concerns they were misused. In relation to the failure to produce bank statements Mr Saadeldin testified that he had made attempts to produce further evidence of his payments but was told by the Commonwealth Bank that there were no records available. He exhibited an email from the bank which said that as the requested records dated back more than seven years the request for duplicate statements "could not be actioned".
110 Although Timeline was not, in fact, incorporated until August 2010 and it did not have a bank account until October 2010 that does not show that Mr Ahmed and Mr Isaacs were not gathering monies for their planned investment in the Lara Property prior to that. The evidence shows that Mr Ahmed and/or his nominee entered into a contract for the purchase of the Lara Property for $975,000 on about 14 July 2010 and it is possible that they were gathering monies for such a purchase prior to that time, which they later passed on to Timeline. Mr Saadeldin has the burden to establish his claim, but it is relevant that the records of Timeline and the Scheme do not scotch the possibility that his account is a truthful one.
111 It is relevant too that the 2011 Statement and the 2013 Agreement show that Timeline and its directors acknowledged that the sum of $180,000 was paid to them by Mr Saadeldin. While I have concerns about the truthfulness of aspects of Mr Ahmed's account the Receivers did not cross-examine him either.
112 To decide that Mr Saadeldin did not, in fact, advance $180,000 to Timeline would be to reject his evidence that he did so, when he was not challenged on cross examination, and his evidence was partially corroborated Ms El-Hag, Mr Al Baidhani and Mr Nor who were not cross examined either. I had the benefit of seeing Mr Saadeldin give evidence and, although not without some uncertainty, I concluded on the balance of probabilities that his account should be accepted.
113 However, as the Receivers' submitted, it does not necessarily follow that Mr Saadeldin is entitled to four blocks of land in the Lara Property as provided by the 2013 Agreement or to $320,000 in lieu thereof. The only reference to Timeline being entitled to blocks of land upon the subdivision of the Lara Property was the recitals to the 2013 Agreement itself, and Mr Ahmed's self-serving evidence as to that entitlement. Mr Ahmed did not exhibit any documentation to support his assertion that there was an agreement for Timeline to receive such land, and the existence of such an agreement is inconsistent with the PDS. The law requires that there be a written document to create an interest in land, and there is not.
114 I did not accept Mr Saadeldin's contention that the 2011 Statement created an equitable charge over the assets of Timeline. There is nothing in the 2011 Statement which created a charge or any security over the Lara Property, and at best it is an acknowledgement of indebtedness. In the hearing counsel for Mr Saadeldin withdrew the claim for four blocks of land from the Lara Property or $320,000, but maintained a claim for reimbursement of the $180,000 advanced.
115 Having regard to my conclusion that Mr Saadeldin in fact advanced $180,000 to Timeline I consider he is entitled to a payment of that amount from the Fund. In my view Timeline never had an entitlement to receive lots from the proposed subdivision of the Lara Property and thus the statements made by its representatives to Mr Saadeldin that it had such an entitlement (and which led to the formation of the 2013 Agreement) were either: (a) misrepresentations which gave Mr Saadeldin a right to claim damages from Timeline; or (b) were such that the 2013 Agreement proceeded on a false premise so it was never effective to novate Timeline's obligations in respect of the original $180,000 advance. If they were misrepresentations then Mr Saadeldin acted to his detriment in signing the 2013 Agreement rather than pursuing Timeline for the amount he was owed. Either way he can make a claim for $180,000 as a creditor of Timeline. Under the terms of the pooling orders made on 13 March 2019 Mr Saadeldin's claim as a creditor of Timeline can be paid from the Fund.
116 Having been persuaded on the balance of probabilities that Mr Saadeldin in fact advanced $180,000 to Timeline for a property investment, and having regard to the Receivers' alternative recommendation, I considered it appropriate to order the payment to Mr Saadeldin of $180,000 from the Fund, in full satisfaction of all claims he has against Timeline and REIT.